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Why Cisco Is Bringing $67 Billion Back to the States

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Feb. 22 2018, Updated 7:45 a.m. ET

New tax code encourages foreign profit repatriation

A new US tax law was passed in late 2017, reducing the corporate tax rate from a lofty 35% to 21%, and encouraging American companies to repatriate profits at a 15.5% tax. Future profits will not be subject to repatriation tax.

This news is particularly good for tech giants that were hoarding huge amounts of cash abroad to avoid being taxed 35% on repatriation. Last month, Apple said it would repatriate a good chunk of the $252.3 billion it has abroad, to boost spending in the United States.

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Cisco to repatriate most of its foreign profits

After reporting its quarterly results on February 14, Cisco Systems (CSCO) stated that, in the current quarter, it would repatriate $67 billion of its cash held abroad. The company said most of its repatriated cash will be used to buy back shares and dividends. At the end of fiscal 2Q18, the networking giant had $73.7 billion in cash and equivalents, with most of it stashed up overseas. Cisco stock rose 6% in after-hours trading. Tech giants Amazon (AMZN) and Alphabet (GOOG) have said that the change in the tax code has not affected their spending plans.

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