Microsoft: $20 Billion Of Cash Not Enough, So We're Borrowing More (MSFT)
So why is it issuing bonds now, when it already has cash coming out of its ears? To make another pass at Yahoo? To buy Salesforce.com? Another company?
To take advantage of a debt market starved for investments that are probably better credits than the United States government?
Or, most likely, to lever up and buy back a boatload of its own stock, which it considers deeply undervalued. (9X trailing earnings).
[Microsoft] is considering senior unsecured debt securities, according to a regulatory filing today with the U.S. Securities and Exchange Commission. The shelf registration clears the way for the company to issue debt at any time.
A bond offering from Microsoft, which carries top credit ratings from Standard & Poor’s and Moody’s Investors Service, would be in high demand, said Brad Lutz, vice president of investment research at Declaration Management & Research LLC, which manages about $16 billion in fixed-income assets. It helps that the company operates outside the realm of finance, he said.
“Non-financials have generally received a warm reception by the investment-grade capital markets,” Lutz said in an interview from his office in McLean, Virginia. “There’s certainly demand for higher-quality issuers.”
The open question: What is Microsoft planning to do with the cash?
Might also have the side benefit of helping provide more high quality debt for others to invest in. All of the titans of tech with hordes of cash would benefit from doing the same.
Henry, if Apple is so seriously undervalued why isn't Steve Job's using his cash horde to buy back shares?
a company with brains. without getting fancy, their IRR is waaaaaay higher than dirt cheap borrowing costs right now.
this is a crisis of confidence and too much leverage.
but leverage works in the other direction.
you show 'em, microsoft.
In case Apple bought Sun, Apple would seriously enter high-end server space, merge Solaris and Mac OS X (nightmare for MS), use hardware engineers for iPod/iPhone/Macs/Servers and transform AppleTV into some kind of full-blown home system (movie/music/photo storage, gaming, etc, etc). Apple could even buy AMD+ATI too. They get supply of x86 CPUs, graphics chips, chipsets, storage systems - and Sun already ships x86-64 stuff. Let's remember, Apple is primarily a hardware shop with killer software to boot.
With one smart purchase MS could end all that. Of course, SGI (also, loads of server/visualisation/workstation stuff, XFS... ) isn't all that financially stable either...
With so many hi-tech companies wobbling around, MS with their cash and bonds could get IBM big in no time at all.
Today, MSFT does not have a boatload of anything except a dying OS that is Windows Mobile, a desktop OS that is looking a bit worse for wear, a future desktop OS that is looking like the walking dead, and an office suite that does quite well.
OTOH, Apple has $7B more than MSFT in the bank, growing market share at the expense of MSFT in the desktop, laptop, mobile, and entertainment markets.
So how does MSFT respond to this successful multi-front threat by Apple? By innovating? No. By going further into debt...when
Apple owes $0. Bravo, Mr. Ballmer!
Stock buybacks (the sort unrelated to employee compensation) are a bit of a scam and I always sell immediately after the buyback.
Why aren't Microsoft shareholders more angry?
buying apple is a stupid idea. wouldnt be allowed.
buying sun, sgi, sap are all stupid ideas. supprised you haven't suggested they buy cisco - which makes as much sense as these other suggestions.
(Apple buying sun is equally stupid. Apple, rightly, wants nothing to do with enterprise.)
MSFT buying yahoo is also stupid. just partner on the search for $2bn instead of buying whole company for $15bn.
But, MSFT buying salesforce or similar is a great idea.
buying other true enterprise Saas plays (email archiving, erp, etc) are also great ideas. transformational, and inline with stated (correct) strategy.
It is all about the cloud from here on out.
now get back to your day trading and leave the thinking to those who can do it without hurthing themselves.
And, yes, it would be Google, if anyone, who bought Sun.
Apple I don't really see buying anyone. I suspect their corp. culture is so unique that any large buy would be a deadend.
Now, if Facebook bought eBay or AOL...then they might be cooking with gas. Facebook has the audience and the useage, but they don't really seem to understand the crux of their power -- the value added stuff that people would use it for (i.e. buying something their friend had put on eBay.)
AOL would provide them with a huge number of accounts to convert into Facebook accounts and the social graph benefits would probably be pretty sweet. And, I would use Facebook for email if I had the option.
Mike --- http://www.wannadevelop.com
What, with all ~$50m they have left in cash?
and the social graph benefits would probably be pretty sweet.
And is this "social graph" thing just some sort of a "web 2.0" conference injoke? I did a fair bit of graduate CS including a fair bit of graph theory and I have no flipping idea what you kids are talking about.
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