Google is keeping a large portion of its cash outside the US so it can use as much as $30 billion for possible acquisitions, the company said in a letter to regulators.
The 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 letter to the US Securities and Exchange Commission, filed yesterday 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 said.
“It is reasonable to forecast that Google needs between $20 to $30 billion 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 $3.2 billion purchase earlier this year of digital-thermostat maker Nest Labs, based in Palo Alto, California.
The company also has made several smaller purchases, benefiting Google’s 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 Google said in the letter, which was a response to a question from the SEC about its plans for reinvesting foreign earnings.
At the end of last year, $33.6 billion of Google’s $58.7 billion 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 U.S. operations.”
In addition to acquisitions, the company sees other uses for overseas earnings, such as $2 billion to $4 billion for capital expenditures. That includes data centers and other operations.
The company also needs $12 billion to $14 billion for a research-and-development cost-sharing agreement, according to the letter.
Bloomberg
