Thu February 7, 2013
Dell Inc. Comes With Pile of Cash
If you’re spending $24 billion to buy a company, it’s important to know that that company also has $14 billion in cash. That’s Dell’s situation exactly, according to its most recent financial filings. But there’s a catch: it’s in overseas accounts.
Company founder Michael Dell, who’s trying to buy the company, can touch that money, but he’ll pay a steep price, according to Lillian Mills, chairwoman of the Accounting Department at UT’s McCombs School of Business. She says that money was earned outside the United States, and if it comes home, it’s subject to U.S. taxes.
“$14 billion is more than their earnings, and that would then become subject to up to a 35 percent tax rate,” Mills said.
Lots of big companies, public and private, are in the same situation. The New York Times estimates that U.S. companies altogether have $1 trillion sitting in those offshore accounts. And Mills says companies are pushing for a special tax break.
“You can leave that cash overseas while you continue to lobby Congress for a more favorable treatment of the foreign earnings,” she said.
Mills says Dell can probably use some of the offshore money, tax-free, to pay interest on loans he's using to buy the company. But she says most of the money will probably just sit there. Waiting to come home.