The CA CEO Said The Same Thing

A few readers have asked about Symantec's overseas cash, which the Symantec CFO used as an excuse for why the pace of share repurchases cannot be increased. I will respond to this but I first want to remind readers that last July I attended the CA Investor day and the CA CEO gave the same excuse. An activist came in and he found a way. Here is the tape:

There is a way for Symantec to return more cash:

  • Symantec has nearly $900 million in US cash and generates more than half its cash in the US.

  • Symantec could borrow for next to nothing in the US, considering that it has the cash overseas. If there is a repatriation holiday anytime in the future they could net this out.

  • This does not explain why Symantec refuses to make a commitment to shareholders to at least continue repurchasing shares at the same pace.

  • I would even argue (and I know this is an unpopular view) that it pays to repatriate the cash and pay the taxes. If an item that was worth $1 was selling for 50 cents, it would make sense to pay a 20% tax to purchase that item. A rational person would not avoid buying that item in order to save on taxes. By the same token given how undervalued Symantec is it would make sense to repatriate money to repurchase shares. This is very unlikely.


David Packman said...

I finally have a few minutes to comment.  Even if the cash is technically overseas (which in reality it may not be but instead invested in US government securities), there are ways of bringing the cash back to the US without incurring the 35% corporate tax rate.  So far, the company does not see the need to employ such methods.  If the stock price goes down far enough, then it will . . .

Tsachy Mishal said...

in a perfect world that is the way it would work. Unfortunately, management does not always do what is right for shareholders. Management bonuses are often dependent in revenue targets which acquisitions help even if it is not in the best interest of shareholders.