Apple sells bonds in record deal

AppleApple has sold 17 billion US dollars (£10.9 billion) in bonds in a record deal spurred by the company's plan to placate its frustrated shareholders.

The Cupertino, California-based company sold the bonds in its first debt issue since the 1990s to raise money to pass along to shareholders through dividend payments and stock buybacks. The payments are part of an effort to reverse a 37% drop in Apple's stock price during the past seven months amid intensifying concerns about the company's shrinking profit margins as it faces more competition in a mobile computing market that Apple revolutionised with its iPhone and iPad lines.
Apple has 145 billion dollars (£93.3 billion) in cash, more than enough for the 100 billion dollar (£64.3 billion) cash return programme it announced last week. But most of its money sits in overseas accounts, and the company does not plan to bring it to the U.S. unless the federal corporate tax rate is lowered.

With interest rates so low, it makes sense for Apple to borrow a large sum of money rather than pay a big tax bill. In addition, raising the money through a corporate bond sale gives Apple a tax benefit, because interest payments on corporate debt are tax-deductible.

The downturn in Apple's stock price obviously has not dampened bond investors' enthusiasm for one of the world's most prosperous companies. Demand for a piece of Apple's offering was so intense that bankers believe they could have sold twice as much debt, according to The Wall Street Journal.

As it is, the 17 billion dollar (£10.9 billion) bond offering is the biggest ever. The previous record for a corporate bond deal was set in 2009 when Swiss drug company Roche Holdings completed a 16.5 billion dollar (£16.5 billion) issue, according to research firm Dealogic.

With the demand outstripping the supply for the Apple bonds, the investment bankers were able to lower the interest rate to be paid on the debt.

Apple laid out its plans to issue six different types of bonds in a Tuesday regulatory filing. The bonds range in duration from three years to 30 years.

Jobs done: Apple's finest creations
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Apple sells bonds in record deal

Apple I (1976): Apple's first product was a computer for hobbyists and engineers, made in small numbers. Wozniak, left, designed it and Jobs dealt with the funding and marketing. The computer went on sale priced at $666.66

Apple II (1977): One of the first successful personal computers, the Apple II was designed as a mass-market product, retailing at $1,298, and was the first personal computer to feature colour graphics. Several upgrades for the model followed, and the product line continued until 1993. It was so popular that Jobs' fortune exceeded $100 million by the time he turned 25.

Lisa (1983): Following a visit to Xerox's research centre in Palo Alto, California, Jobs was inspired to build the first commercial computer with a graphical user interface, with icons, windows and a cursor controlled by a mouse. It was the foundation for today's computer interfaces, but the Lisa, which cost a whopping $9,995, was too expensive to be a commercial success.

Macintosh (1984): The Macintosh was heralded by an epic advert shown during the Super Bowl, directed by Ridley Scott, which referenced George Orwell's 1984. Like the Lisa, the Mac had a graphical user interface, but it was faster and at $2,495, a quarter of the price. People soon realised its potential for desktop publishing.

iMac G3 (1998): In 1985, Jobs and Apple's CEO, John Sculley clashed, leading to his and Wozniak's resignation from the company. When Jobs returned to Apple 11 years later, Apple was struggling. The radical iMac was the first step towards healing the ailing company. It was strikingly designed as a bubble of blue plastic that enclosed the monitor and computer. It went on sale priced at $1,299.

iPod (2001): In 2001, the game well and truly changed when the first iPods went on sale. The first generation of iPod cost $499 (£400), but as Apple updated and modified the winning formula, prices came down. Of course, it wasn't the first digital music player with a hard drive, but it was the first successful one. The iPod's success prepared the way for the iTunes music store and the iPhone.

iTunes (2001): Apple also introduced iTunes in 2001 - a media-playing computer programme, useful for playing and organising music and videos. The music store was added in 2003, with 200,000 songs at 99 cents, or 79p, each, giving people a convenient way to buy music legally online. iTunes is now an integral part of Apple software: the iPhone cannot be used without first 'synching' with the owner's personal iTunes.

iPhone (2007): If the iPod laid the foundations, then the touch-screen iPhone is Apple's towering glory. The world was introduced to 'apps', which made the phone a device not just for making calls but for managing money, storing photos, playing games and browsing the web. Apple is now the world's most profitable maker of phones, and the influence of the iPhone is evident in all smartphones. The current model, the iPhone 4, sells for $749 (£612), and the arrival of the iPhone 5 is eagerly anticipated.

iPad (2010): Dozens of companies, including Apple, had created tablet computers before the iPad, but none caught on. The iPad finally cracked the code, creating a whole new category of computer practically by itself. In the case of the iPad, Jobs, famed for identifying and creating the next big thing, seems to have created a market where none existed. The highest spec iPad currently retails at $699 (£659).


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