3 ms·

> I agree, but I think MSFT (and friends) are in this predicament no matter what. What's the alternative? Returning money to shareholders is the common solutio

> I agree, but I think MSFT (and friends) are in this predicament no matter what. What's the alternative? Returning money to shareholders is the common solution for when you don't know how to grow more and profitability in the businesses you're already in and don't have any particular advantage in entering new ones. I'm not saying that's what they should be doing but sitting on a pile of capital that you don't know what to do with isn't a new problem that we need to invent new solutions for.

dalbasal 6y ago
"Returning money to shareholders" is largely a consequence macroeconomic policy or state of affairs. It is, evidently, not actually a choice that CEOs currently have in practice. Dividends and/or buybacks are one of the powers shareholders do tend to wield, in practice. They want to invest more, not less. Also, IDK if it is a common solution. Nothing is really common at MSFT-scale. A free cash flow like Google, Alphabet, etc. is almost unprecedented. Meanwhile, I do actually think that this is better for shareholders. IMO "Synergies" is a term somewhere between euphemism and a boomerism but for the purpose of "shareholder value" it doesn't matter. At Monopoly/Unicorn/FAANG scale, there are big opportunities for synergy. Think Google-Android. Why is Nuance being owned by Alphabet less efficient than being traded independently or owned by private investors? Why is Alphabet owning vanguard more efficient than owning Nuance? The answer to those question can have no actual impact on reality. If the acquired business is cash generative, they can left to their devices. If the parent company doesn't borrow, then "efficiency" never becomes explicit. Explicit efficiency is relative to cost of borrowing. Implicit efficiency is implied by share prices... and at this point things get foggy.
nemothekid 6y ago
My own uneducated position is that is a new problem because shareholders don't want their money back. Shareholders have been piling money into stocks [1], so if you gave them the money back they would likely just put it right back into Microsoft (or, more likely, it would signal that Microsoft doesn't know what to do with the money, so people would pull out of Microsoft to invest somewhere else). [1] https://finance.yahoo.com/news/more-money-poured-stocks-past-095127730.html https://finance.yahoo.com/news/more-money-poured-stocks-past...
- intuitionist 6y ago
  If they reinvested the dividend right back in MSFT then MSFT can give its owners a tax break and get the same economic result by buying back shares.

dalbasal 6y ago

"Returning money to shareholders" is largely a consequence macroeconomic policy or state of affairs. It is, evidently, not actually a choice that CEOs currently have in practice. Dividends and/or buybacks are one of the powers shareholders do tend to wield, in practice. They want to invest more, not less. Also, IDK if it is a common solution. Nothing is really common at MSFT-scale. A free cash flow like Google, Alphabet, etc. is almost unprecedented. Meanwhile, I do actually think that this is better for shareholders. IMO "Synergies" is a term somewhere between euphemism and a boomerism but for the purpose of "shareholder value" it doesn't matter. At Monopoly/Unicorn/FAANG scale, there are big opportunities for synergy. Think Google-Android. Why is Nuance being owned by Alphabet less efficient than being traded independently or owned by private investors? Why is Alphabet owning vanguard more efficient than owning Nuance? The answer to those question can have no actual impact on reality. If the acquired business is cash generative, they can left to their devices. If the parent company doesn't borrow, then "efficiency" never becomes explicit. Explicit efficiency is relative to cost of borrowing. Implicit efficiency is implied by share prices... and at this point things get foggy.

nemothekid 6y ago

My own uneducated position is that is a new problem because shareholders don't want their money back. Shareholders have been piling money into stocks [1], so if you gave them the money back they would likely just put it right back into Microsoft (or, more likely, it would signal that Microsoft doesn't know what to do with the money, so people would pull out of Microsoft to invest somewhere else). [1] https://finance.yahoo.com/news/more-money-poured-stocks-past-095127730.html https://finance.yahoo.com/news/more-money-poured-stocks-past...

intuitionist 6y ago
If they reinvested the dividend right back in MSFT then MSFT can give its owners a tax break and get the same economic result by buying back shares.