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Friday, August 2, 2019

Alphabet is now the company with the most cash in the world, beside Apple

Apple loses first place in the world rankings after having seen its reserves dwindle from 163 billion in 2017 to 102 billion this year. In comparison, Google's parent company Alphabet holds $ 117 billion in cash.
Alphabet is the new king of cash. The parent company of Google has just dethroned Apple and now displays a treasure of 117 billion dollars in cash - that is to say real money on accounts and not shares, real estate, etc. - against "only" 102 billion for Apple.
Far from being simply ironic, the "only" is explained by the fact that the apple brand still held two years ago not less than 167 billion dollars.
It should be noted, however, that the "overflow" that Apple had accumulated over the years was largely due to the fact that the California company did not repatriate all or part of its profits outside the United States.

With the arrival of Donald Trump, and the facilities made to businesses on taxes owed, Apple has gradually reinjected a portion of his war chest in his business. The Cupertino structure has thus repaid debt issues, repurchased its own shares, in particular to control its capital structure, etc. as a result of pressure from some Wall Street investors.

Alphabet is now the company with the largest "war chest" in the world. But what is even more impressive is that it has increased by $ 20 billion in two years. On paper, you might think that everything is fine and that everyone is happy. In reality, the situation is much more tense than it seems.

Tensions with the states

With such a stock of money, Google seems on a cloud. In fact, the company is in the crosshairs of the EU and Washington especially for its tax optimization, a complex network of money transfers between different entities that allows the firm to pay little or no tax. In times of social tension, this accumulation of wealth beyond the GDP of many states has a perfume of immorality - no illegality, since Google's lawyers and financiers are virtuosos of the legal evasion - which begins to rise to the nose governments.

Tensions with investors

If Apple dropped the ballast in cash, this is because some investors wanted to take advantage of the success of the company by receiving dividends. The dividends that Apple has long retained to continue investing, but past a certain level of cash flow, the company had reached a level above which it was difficult not to redistribute. It took the arrival of Tim Cook at the head of the group for this policy to change.

The situation is now the same with Google, whose source of income and cash management are criticized by large investors. In a Financial Times article, an Allianz executive blames the company for burning cash in various projects that ultimately have no major influence on its source of revenue - advertising. "I would prefer it gives more cash to shareholders and it spoils less," he adds.

A few years ago, major shareholders of Apple made similar comments. In part, these positions prompted leaders of the Cupertino company to engage in share buybacks.

Will the alphabet follow the same path? Perhaps. With 117 billion dollars in cash, anything is possible, this wealth is simply insane. It brings a lot of pressures and problems. But we will not complain!

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