What keeps Apple behind Microsoft - which is AAA-rated doubtless to the intense annoyance of Apple's board - is the highly competitive state of the smartphone market. The iPhone has helped to build a solid foundation for the modern company, but Apple, as its last results showed, is feeling the heat from providers such as Samsung which were not going to allow it a monopoly over smartphones forever. That prevents the rating agencies from giving Apple the top recommendation, although it is now rated on the same credit quality terms as the US government. Of course, a share buyback funded by debt has a number of benefits. It stops Apple having to repatriate cash to the US only for the IRS to impose a retrospective tax charge. In addition, it supports what until recently was a seriously sagging share price - the shares rose 5 per cent after the bond was announced.
Overall, the bond promises to be liquid and easily tradeable with a spread of maturities going right out to 30 years. The shorter-dated three- and five-year notes are likely to be as liquid as cash or treasury bills, and investors will have few doubts about owning them - however, anything longer-dated is a definite risk. Mark Glowrey, a former IC bond columnist, had this to say: "The three-year maturities are offered at 20 basis points over equivalent Treasuries and five-year Federal Reserve Notes, which is a good alternative to keeping your money in the bank. I would be more sceptical of the longer-dated issues. The 30-year Apple bonds yield 3.85 per cent and who knows what will happen by 2043."
A sage point from Mr Glowrey. Apple has already flirted with bankruptcy once in the past 30 years and the rapid rate at which technology changes means the long-dated bonds have got to take account of how disruptive new developments can be. After all, weren't we all talking into phones the size of bricks in the 1980s before digital technology brought the sizes down? Also, with the "Google Glasses" that will allow information to be displayed to you in the manner of a fighter pilot, it won't be long before Apple has to develop some sort of telepathy communications device to appear relevant and technologically cutting. It could be inserted directly into your cranium, or worse. Just think of that when your broker calls.
