M&A philosophy likely to remain unchanged. With the new tax structure we expect Apple will bring $214B back to the U.S. using a 15.5% one-time repatriation tax rate. We don’t expect this cash will change Apple’s M&A philosophy, which will likely continue to be focused on sub-$1b technology acquisitions.

Framing uses of cash. We do anticipate Apple will increase its share buyback by $69B, which will be added to the $166B that Apple has already spent on share repurchases from Jun-12 to Sep-17. Additionally, we expect Apple will increase its annual dividend by 15%, higher than the 10% increase they announced in April of both 2017 and 2016.  We believe Apple will maintain its debt level at the $104B. In theory this will leave Apple with about $150B in cash, but in practice it won’t get that low (more on that below). We look for this to be announced in April 2018, when Apple reports its Mar-18 quarter.

Unlikely that actual cash levels will reach $150B.  It’s unrealistic to assume that Apple will reduce its cash balance from $269B to $150B. Keep in mind our $150B cash estimate reflects the total cost of the buyback and dividend. In practice, the cost of those two programs will be spread out over 3-4 years, and Apple will continue to generate cash during that time. To give a sense of Apple’s current cash generation, the company generated $31B in cash from Sep-16 to Sep-17. If we assume $3oB in annual cash generation for the next 4 years implies a 2022 cash ending balance of $270B, unchanged from the $269B today.

Notable details. Total cash balance as of Sep-17 is $269B which includes $252B overseas and $17B in the U.S.

• The company has $104B in debt carrying an interest rate of 2.2%.
• Apple has paid out $166B in buybacks and $61B in dividends since 2012.
• The $69B buyback will likely be executed over a 3 year period.
• The 15% annual dividend increase will cost Apple about $10B over a 4 year period.