Let me be the millionth investor to express frustration at Alphabet Inc’s approach to capital allocation. When the Google parent reported earnings recently, its cash balance totalled a whopping US$102bn. What in the world does the company need with all that cash? There are fewer than 100 companies in the world with a market cap greater than US$100bn, yet Alphabet has as much stuffed in a mattress somewhere.
This was all supposed to end with the recent change in US tax law involving the taxation of foreign profits. For many years, US-based multinationals avoided taxes on overseas earnings by keeping those cash balances offshore. Many companies including Alphabet took advantage of this quirk in the tax code.
Everyone understood the dynamic, but nobody liked it. Investors acquiesced fearing the tax burden that could be triggered if funds were repatriated, and the US government bemoaned the tax revenue leakage. Continue reading “Google’s Cash Road to Nowhere” →