macnn/electronista
04/02/2007, 11:20am, EDT
Monday, April 2ndMicrosoft bleeding cash?
Microsoft's cash reserves are less than half what they were two years ago, according to a report. The Redmond developer, which once had as much as $64.4 billion in 2004, is now down to $29 billion at its most recent tally. The company claims that the shrink been a deliberate choice to buy into smaller companies and to reward investors."We're focused on striking the right balance between investing in the company's growth and returning capital to shareholders," said Microsoft's investor relations manager Colleen Healy.
However, the change may also be a reflection of the company's unappealing prospects, the article notes. The company has in recent years gained security by settling an antitrust trial for its Windows OS and has seen its share price largely unmoved, selling below $30 since 2001. Buying back shares, which the company plans to do until 2011, is a way of persuading the stock market that its shares are undervalued.
By contrast, the company's historical rival Apple has seen rapid growth of its at once diminutive stock, seeing a pair of 2-for-1 share splits while increasing to over $90 per share during the same five year period that saw Microsoft's stocks effectively remain stale.
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*snicker*
Sam Walton went to Ben Franklin 5 & Dime and asked him to franchise putting store in small towns.. they laughed and refused, so he made his own stores... WalMart.
Who got the last laugh? Bill Gates should quit while he's behind and invest in a teu Innovative company that knows how to turn a profit in the 21st Century.
The only two money makers they have in their stable at all these days are Windows and Office. Everything else there is bleeding cash like there is no tomorrow.
The day is definitely coming when this will catch up with them....
Absolutely. Categorically. Incorrect. A business is not a bank - stockholders do not give money to a business just to throw it under a mattress. Businesses are meant to take that money and invest it in making more money. Your argument, while making sense from a "safe investment" standpoint, makes no sense from a business standpoint, because you don't want the business that is holding your cash to use it to fund "down times". You want the business to be able to recover from the down times through operations and smart decision making.
Yes - operating cash is good, but only good enough to combine with other current assets (ie receivables) to be able to cover current liabilities - you don't even want the business to hold on to enough cash to cover long-term liabilities because, again, you want the business to be able to leverage debt (other peoples money) to get a better return on YOUR money. You want the business to invest your money in furthering the business, or you want the business to return your money so that you can invest it yourself.
Except for the whole "Enron/WorldCom/Tyco/Global Crossing/Nortel" thing, you may be right.. Oh yeah, as long as you also make exceptions for those stocks that people invest in on speculation.. which is all of them.
Um, to go further on this, its really, really wrong. Stock price is only a test based on your perceived market and outlook. And since stock price is completely based on supply and demand, with demand based on perceived hope for large amounts of financial growth, a stock's price has really nothing to do with a company's value or its success. (Besides Enron, look at Apple. Several years ago, the stock price was so low, Apple's market value was less then its net worth!) Hell, considering that analysts can easily manipulate a stock's value by just what list they stick it on should show you that it has no meaning at all.