Trump's Tax Plan: 5 Tech Companies That Could Win Big

Tax Holiday

The Trump administration may be seeking to drop the corporate tax rate to 15 percent from the current 35 percent, but that's not the only way that some large U.S. companies could benefit from the tax plan. The administration has also signaled intentions to allow corporations to repatriate cash held overseas at a lower, one-time tax rate. President Trump has previously suggested a one-time rate of 10 percent, though his administration isn't offering a proposed figure for now. In any case, a handful of tech companies with massive overseas cash holdings would stand to reap the largest benefits from a "tax holiday" of this sort. What follows are more details on five of these tech companies.

Apple

Cupertino, Calif.-based Apple leads the way among all U.S. companies in terms of the amount of cash held overseas. The company reported it had $230.2 billion held by foreign subsidiaries as of Dec. 31, 2016, according to its latest quarterly regulatory filing with the U.S. Securities and Exchange Commission. Notably, that was an increase of $14.2 billion from the end of the prior quarter. Apple CEO Tim Cook has previously expressed an interest in returning some of Apple's overseas holdings to the U.S. in 2017.

While the money could be deployed for acquisitions in the U.S., it may be more likely that Apple would use the funds for stock buybacks -- given the company's history of mostly pursuing small M&A deals and its propensity for share repurchasing. Apple is currently in the midst of a $175 billion stock buyback program, with $144 billion worth of shares repurchased as of the end of 2016, according to the regulatory filing.

Microsoft

Redmond, Wash.-based Microsoft ranks at No. 2 for corporate cash holdings outside the U.S. -- though its holdings are only half of Apple's. Microsoft reported $116.3 billion held by its foreign subsidiaries as of Dec. 31, 2016, according its latest quarterly regulatory filing with the SEC.

While Microsoft has gone through a number of major rounds of layoffs in recent years, there's little indication that a tax holiday would help to spark hiring at the company -- at least based on past precedent for tax holidays. A 2011 Congressional report found that the 15 largest corporate beneficiaries of a 2004 repatriation effort actually reduced their workforces in the following years, by about 21,000 jobs in total. Microsoft is also oriented toward stock buybacks at the moment, after announcing plans in September to repurchase up to $40 billion worth of shares.

Cisco Systems

San Jose, Calif.-based Cisco Systems is No. 3 on the list of U.S. companies with the largest overseas cash holdings. Holdings in Cisco's foreign subsidiaries totaled $62.3 billion as of Jan. 28, according to its latest quarterly regulatory filing with the SEC. Credit Suisse is particularly enthusiastic about the prospects for Cisco in Trump's tax plan, giving the networking giant a double upgrade -- from underperform to outperform. Credit Suisse contends that the repatriated cash could enable M&A activity -- the company is an active acquirer, as recently evidenced by its $3.7 billion buy of AppDynamics -- as well as stock buybacks (Cisco announced a $15 billion share repurchasing program in February 2016).

Alphabet

Mountain View, Calif.-based Alphabet, the parent company of Google, comes in fourth place among U.S. corporations for its holdings of cash outside the country. The amount held by foreign subsidiaries stood at $52.2 billion as of Dec. 31, 2016, according to its latest quarterly regulatory filing with the SEC. Whether or not Alphabet would be interested in a tax holiday for foreign cash holdings is an open question, however. "Our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations," Alphabet wrote in the regulatory filing. Alphabet has been less active in stock buybacks than many other major tech companies, though the firm said in October that it would repurchase $7 billion worth of shares.

Oracle

Redwood City, Calif.-based Oracle is tied with Alphabet for holding the fourth-most cash overseas among U.S. corporations. Oracle held $52.2 billion in foreign subsidiaries as of Feb. 28, according to its latest quarterly regulatory filing with the SEC. Stock buybacks are a likely use of any repatriated funds for Oracle, as the company has a history of repurchasing shares. In March 2016, Oracle announced a $10 billion stock buyback program, the latest of many share repurchasing programs over the years.