Cisco to Repatriate $67 Billion in Cash

Another huge sum of money will be repatriated to the U.S. following the approval of the new tax law and much of it will go into investor’s pockets.

Tech giant Cisco announced on Wednesday that it is planning to bring home the $67 billion it is holding in foreign profits over the next few months.

The company, based in Silicon Valley, makes computer network equipment and said it would pass on a substantial chunk of the cash brought back to shareholders during the upcoming two years via share buybacks as well as an increase in dividends.

In all, Cisco investors will receive a $44 billion windfall. It is the latest big company in the U.S. to outline it plans for bringing home cash it has stashed for years overseas.

Multinational corporations previously were reluctant to bring large amounts of money from offshore into the country due to the large taxes they would need to pay. However, the recent tax bill Congress passed and the president signed in December offers companies a lower tax rate for one time on funds repatriated.

The new law means as well that companies no longer can avoid paying taxes on international profits from the past by holding them outside the U.S. Now they must pay tax on the profits whether they are brought back or kept outside the U.S.

One estimate by Moody’s in November of last year was that companies from the U.S. were holding upwards of $1.4 trillion in offshore cash.

Five large companies – Apple, Microsoft, Google, Cisco and Oracle – represent close to $600 million of the total estimate.

Tax change supporters argued that allowing companies an incentive to return their money could boost the economy of the U.S. through promoting investment as well as more hiring.

However, critics have said that Main Street U.S.A. would not feel the effect due to many companies opting to reward their shareholders through stock buyouts and dividends.

It appears that is what Cisco will do. Its announcement made investors happy as the stock for the company was up close to 7% in trading after hours.

Apple’s approach was different in January as it promised new jobs as well as investment together with plans of returning its money to the U.S.

Apple announced it would pay taxes of $38 billion on the sum of money it has kept overseas and pledged the creation of 20,000 new jobs while investing more than $30 billion in new facilities in the U.S. over a period of five years.