Google keeps $30bn outside US for deals, regulator told
Google is keeping a large portion of its cash outside the US so it can use as much as $30bn for possible acquisitions, the search engine said in a letter to regulators.
The owner of the top web-search engine generates about half of its revenue overseas, and it avoids paying US taxes by keeping foreign earnings abroad. Google needs the cash for deals as competition rises overseas, according to a December 20 letter to the US Securities and Exchange Commission, filed this week as part of a correspondence with the agency regarding disclosures.
"We continue to expect substantial use of our offshore earnings for acquisitions as our global business has expanded into other product offerings like mobile devices," the letter says. "It is reasonable to forecast that Google needs between $20 to $30bn of foreign earnings to fund potential acquisitions of foreign targets and foreign technology rights from US targets in 2013 and beyond."
Google, while facing criticism for keeping the cash parked overseas, has been stepping up its deal activity, including the $3.2bn purchase this year of digital-thermostat maker Nest Labs. The company also has made several smaller purchases, benefiting its advertising, cloud services and mobile businesses.
"In the past few years we have completed significant acquisitions with the individual deal size increasing in more recent years, and this trend is likely to continue in future years," the California-based company said in the letter, which was a response to a question from the SEC about its plans for reinvesting foreign earnings.
The largest US-based companies added $206bn to their stockpiles of offshore profits last year, according to securities filings from 307 corporations reviewed by Bloomberg News. At the end of last year, $33.6bn of Google's $58.7bn of cash, cash equivalents and marketable securities was held by its foreign subsidiaries.
"If these funds are needed for our operations in the US, we would be required to accrue and pay US taxes to repatriate these funds," the company said in a filing in February. "However, our intent is to permanently reinvest these funds outside of the US and our current plans do not demonstrate a need to repatriate them to fund our US operations."
In addition to acquisitions, the company sees other uses for overseas earnings, such as $2bn to $4bn for capital expenditures. That includes data centres such as the one it has in Ireland. The company also needs $12bn to $14bn for a research-and-development cost-sharing agreement, according to the letter. (Bloomberg)