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Big Tech's Big Lie: Instead Of Hiring, Tech Companies Spent Tax Savings On Buybacks
(the Q1 FY19 reports will reflect these guaranteed)
Back in 2017, when they were making their supportive case for Trump's tax cut and offshore tax repatriation holiday, the largest US technology companies promised they would go on hiring sprees and boost the economy. Just over a year after getting what they wanted, fund flow data shows that - contrary to Goldman's recent calculations* - these firms gave most of their huge tax savings to investors in the form of buybacks.
According to Bloomberg calculations, the top 10 US tech companies spent more than $169 billion purchasing their shares in 2018, a record 55% surge from the year before the tax changes.
the industry as a whole authorized the greatest number of share buybacks ever recorded, totaling $387 billion: more than triple the amount in 2017.
Goldman which has written no less than three report in the past month defending stock buybacks that only benefit the company
including insiders whose compensation is frequently linked to stock return, stock repurchases do little if anything for the economy, especially when compared with other potential uses of that money, including hiring more workers.
(A theme here perhaps)
When Trump signed the Tax Cuts and Jobs Act into law in the final days of 2017, it cut the corporate tax rate to 21% from 35%, while offshore profits could be repatriated at a special rate of 15.5%, and was meant to encourage companies to bring the money back to the U.S.
They did not. Instead, much of the proceeds were spent on buybacks.
(microsoft actually authorized a huge buyback just after HRC lost in 2016)
Before the law, the largest overseas cash hoards among U.S. companies were held by Apple, Microsoft Corp., Cisco Systems Inc., Oracle Corp. and Alphabet.
It is these companies that in the past year unleashed a historic buyback spree the likes of which have never before been seen.
To be fair, not all the tax savings were transferred into investors' pockets: spending on R&D climbed slightly, while capital expenditures rose because Alphabet and Facebook almost doubled spending in that category. On the other hand, Apple and its peers "have yet to bring manufacturing back to the U.S., as President Donald Trump had hoped." And, most importantly, there was no surge in tech hiring.
Here's what we do know about corporate cash use in the past year.
Bloomberg analyzed 2018 spending by 10 of the largest U.S. tech companies: Alphabet, Amazon.com Inc., Apple, Cisco, Facebook, Intel Corp., International Business Machines Corp., Microsoft, Oracle and Qualcomm Inc. The study looked at six common uses of corporate cash: buybacks, dividends, hiring, acquisitions, capital expenditures and research and development. The 2018 statistics were compared with previous years.
Contrary to the abovementioned 55% surge in buybacks, as the top 10 tech companies spent more than $169 billion on buybacks in 2018, up from $109 billion in 2017, hiring fizzled, as worker ranks grew just 8.7% in 2018, versus 24% the year before. Clearly boosting employee numbers was not the key concern for corporate executives.
Finally, the all important "other" category, namely capital expenditures, did surge in 2018, but once again largely to just two companies as Alphabet and Facebook nearly doubled their Capex spending, which includes computers for their huge data centers. That helped boost the overall metric to 40 percent growth, from 23 percent the year before.
Of course, as Bloomberg observes, in many ways these results were foreseeable: In 2004, President George W. Bush launched a similar corporate tax holiday in the U.S. that allowed companies to pay 5.25 percent on overseas profits if they returned the money to the U.S., rather than the standard 35 percent rate. The administration pitched it as a jobs booster, but it was followed by large share repurchases.
Fast forward 12 years, when the largest US companies lied…. again.
When Trump won the 2016 election, some tech companies saw another chance. IBM Chief Executive Officer Ginny Rometty wrote to the president-elect in late 2016, stating that his proposal to cut taxes on businesses and their repatriated overseas earnings would prompt companies to invest domestically.
So what happened next? IBM cut 16,000 workers on a global basis last year, and its R&D budget declined. Capital expenditures increased by less than $166 million, or 5 percent. And while buybacks were relatively unchanged, this followed many years in which IBM repurchase so many shares and issued so much debt to fund these purchases, the company at times was on the verge of losing its pristine investment grade rating.
(like they would EVER do that)
rest at link
https://www.zerohedge.com/news/2019-04-15/big-techs-big-lie-instead-hiring-tech-companies-spent-tax-savings-buybacks
Going to have to let it burn. How can you fight that? Sad to see
most likely. Lot's of underground stuff there. A museum is located to the North of it and it's entrance is underground.
this is going to go over well amongst the citizens.
/sarc
been to all three- this is such bullshit. Had pictures taken in our wedding stuff at the back end of the cathedral, outside, close to where the fire started-was just the two of us and no one else. Words can't describe at this point.
sorry for your loss french anon.