How Apple could make money bailing out Greece

Apple has more than doubled its hoard of cash to US$194 billion in cash and equivalents, despite paying generous dividends and buying back stock. Photo: Getty.

That Apple should buy Greece with all the useless cash it has on hand is just a joke that won't go away.

Yet it's true that, if big American corporations and European politicians had any imagination, they could probably engineer a bailout for the nearly bankrupt country on terms that would benefit everyone.

Back in 2012, an investor attending Apple's general meeting asked Tim Cook, the chief executive officer, if he'd ever considered using the company's growing cash stash - $97.6 billion at that point - to acquire Greece.

"We've looked into many things," but not that, Cook replied.

Of course, entire countries can't be bought - not even in novels, it seems. In Iain Banks's "The Business," such a deal fell through, even though the acquisition target was an obscure Himalayan monarchy, not an old democracy like Greece.

So everyone had a laugh and moved on.

Things briefly got better for Greece when it received the biggest bailout in history, and private creditors agreed to a haircut.

But its economy still failed to grow, and the country's debt burden, at 175 per cent of economic output, remained unsustainable.

Apple, in the meantime, more than doubled its hoard, which now amounts $194 billion in cash and equivalents.

The company has been paying generous dividends and buying back stock, but the cash pile keeps growing.

There's no way to invest it all.

For years, Cook has been talking about mind-blowing products his company has in the pipeline, but he's only managed to come up with incremental improvements to existing products, an average streaming music service and an overpriced smartwatch, and these haven't required much capital.

Unless Apple starts building cars - or perhaps spaceships - it will keep accumulating cash.

Apple CEO Tim Cook in 2012 said the company had looked into "many things", but not yet bailing out Greece. Photo: AP.

As will other big U.S. companies. Non-financial American firms hold $1.73 trillion in cash, 4 per cent more than they had a year ago, and $1.1 trillion of that belongs to the 50 biggest companies, according to a recent report from Moody's Investor Services.

Apple, Microsoft, Google, Pfizer and Cisco have stockpiled $439 billion.

Most of that money sits overseas, because if it were repatriated, it would be subject to a 35 per cent U.S. tax.

Spending it, or even giving it back to shareholders, is a pain. No one expects the U.S. to reform its tax system and resolve this issue anytime soon.

So the idea that the top five cash hoarders could now save Greece and do better for themselves in the process is intriguing.

Greece needs about 190 billion euros ($212 billion) to bring down its debt to the manageable level of 70 percent of gross domestic product.

That's about 48 percent of the five companies' combined cash stash.

For paying down the debt, Greece could reward the firms with a special deal on corporate taxes, somewhat like the one Apple now enjoys in Ireland.

That sweetheart deal is being investigated by the European Union and is probably doomed.

Yet Greece's case is different: The EU, as one of the country's biggest creditors, might be inclined to make a special dispensation to the American companies for helping solve the Greek problem.

The U.S. might have some objections, but, as the biggest shareholder in the International Monetary Fund, it, too, stands to lose money if Greece defaults, and the destabilization brought on by a Grexit is certainly not in U.S. interests.

In exchange for less than half of their cash - and just 13 per cent more than it would cost to pay U.S. taxes - the companies would receive an indefinite, ironclad guarantee of low taxes on non-U.S. operations. Not a bad deal.

Greece, for its part, would get debt relief, plus the companies' European headquarters.

Many executives would probably welcome the move to a warm seaside, and Greece would have the beginnings of a powerful tech cluster, which would draw in other companies and create service jobs.

With such help, the Greek government could probably afford to be less austere than its creditors want it to be.

But it would still need to reform inefficient public services and become more business-friendly, or risk missing out on the obvious benefits of working with the tech titans.

I'm pretty sure this kind of bailout would get the Greek people's approval if put to a referendum.

All it would take to work it out would be a little flexibility.

Sadly, that is a quality everyone involved in the Greek crisis today appears to lack.

So instead Greece will keep stumbling toward bankruptcy, and the American companies will keep accumulating cash they don't know how to spend.

Leonid Bershidsky is a Bloomberg View contributor based in Berlin.