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"They can't pull out all of there investments right now, it would devastate the stock market." Really? Their balance sheet doesn't show a huge amount of long-t

"They can't pull out all of there investments right now, it would devastate the stock market." Really? Their balance sheet doesn't show a huge amount of long-term investments. And yesterday, $1.9 billion worth of Microsoft stock alone changed hands -- it would be very hard for them to upset the market selling gradually. In addition, they're generating at least $4 billion in operating cash flow each quarter, which would support a lot of debt at a low rating. Finally, they could issue stock. Free cash flow is not the issue.

gscott 19y ago
If Microsoft issues more stock it would dilute it's shares which causes some people to pull out of the stock further sending it's price down. I really don't believe they would wipe out hundreds of millions / billions of shareholders value for Yahoo. You just can't take billions of dollars in investments out without proper planning. Just because they can cash out doesn't mean that is a great idea. They would have nothing in reserves. One of the founders of Microsoft, Paul Allen was really big on having reserves that they would not spend and I would be suprised if that attitude didn't still prevail today. Yahoo doesn't throw of enough cash either. Microsoft would have to fire half of Yahoo's employees (think Compaq computers), which would cause customers to run for the hills expecting the worst to happen to customer service and other functions. Yahoo right now is just too expensive for MS.
- phaedrus 19y ago
  Curious. What do you think - has Microsoft been so successful in business at least in part because of its insistence per Paul Allen of keeping large cash reserves, larger than most companies keep on hand? (MiniMSFT blogger said something like, "Why? We're not a bank!") Or is it simply that Microsoft has held a very lucrative monopoly position for many years and just makes more money than it knows what to do with? I.e., perhaps its habit of keeping large cash reserves are just an effect of its success and not any kind of cause of it? The reason I pose the question is that I have been forming a layman's theory that in fact it is all about the cash, even as much for a huge company as it is for a small mom and pop store; that as long as a company has cash on hand it can go on, and when it runs out of cash the end is coming even if it takes years in a downhill slide. If you take corruption as a given, I suspect that all the accoutrements of big-company strategies like pursuing growth over profitability, borrowing money to run at a loss, etc., are nothing more than smokescreen thrown up by upper management to make it look like they're doing a good job when they're really bleeding the company. Rather than being a waste of resources, I rather wonder if keeping a large cash reserve is like a protective armor to keep a company from having to borrow at interest during rough periods. Is this completely off the mark?
  - eru 19y ago
    An indirect reply: Managers usually favour large reserves for it gives them more power and they do not have to beg for capital. Shareholders do not usually want to have cash layin around more or less idle.

gscott 19y ago

If Microsoft issues more stock it would dilute it's shares which causes some people to pull out of the stock further sending it's price down. I really don't believe they would wipe out hundreds of millions / billions of shareholders value for Yahoo. You just can't take billions of dollars in investments out without proper planning. Just because they can cash out doesn't mean that is a great idea. They would have nothing in reserves. One of the founders of Microsoft, Paul Allen was really big on having reserves that they would not spend and I would be suprised if that attitude didn't still prevail today. Yahoo doesn't throw of enough cash either. Microsoft would have to fire half of Yahoo's employees (think Compaq computers), which would cause customers to run for the hills expecting the worst to happen to customer service and other functions. Yahoo right now is just too expensive for MS.

phaedrus 19y ago
Curious. What do you think - has Microsoft been so successful in business at least in part because of its insistence per Paul Allen of keeping large cash reserves, larger than most companies keep on hand? (MiniMSFT blogger said something like, "Why? We're not a bank!") Or is it simply that Microsoft has held a very lucrative monopoly position for many years and just makes more money than it knows what to do with? I.e., perhaps its habit of keeping large cash reserves are just an effect of its success and not any kind of cause of it? The reason I pose the question is that I have been forming a layman's theory that in fact it is all about the cash, even as much for a huge company as it is for a small mom and pop store; that as long as a company has cash on hand it can go on, and when it runs out of cash the end is coming even if it takes years in a downhill slide. If you take corruption as a given, I suspect that all the accoutrements of big-company strategies like pursuing growth over profitability, borrowing money to run at a loss, etc., are nothing more than smokescreen thrown up by upper management to make it look like they're doing a good job when they're really bleeding the company. Rather than being a waste of resources, I rather wonder if keeping a large cash reserve is like a protective armor to keep a company from having to borrow at interest during rough periods. Is this completely off the mark?
- eru 19y ago
  An indirect reply: Managers usually favour large reserves for it gives them more power and they do not have to beg for capital. Shareholders do not usually want to have cash layin around more or less idle.