6 ms·
This is what keeps me from being a shareholder of Microsoft: that they are willing to pay ridiculous premia to purchase speculative or middling businesses. Thi
by hncommenter13 14y ago
This is what keeps me from being a shareholder of Microsoft: that they are willing to pay ridiculous premia to purchase speculative or middling businesses.
Think about it this way. $1.2B in cash would purchase ~39.1 shares of MSFT stock, had they repurchased stock instead of buying Yammer (at today's open of $30.70/sh, per yahoo finance). Those shares have a proportional claim on $106.7M of after tax earnings over the last 12 mos (approx $2.73/sh, TTM, again per yahoo finance). $1.2B represents 1/250th of MSFT's market cap.
Even if Yammer grows revenues at 100% y/y for the next 10 years (it won't), its cumulative after-tax earnings won't come close to the benefit shareholders would have received--esp when discounted appropriately for the risk--had MSFT simply bought back $1.2B worth of stock.
Don't get me wrong, Skype represented even more egregious profligacy. But my point is that I (and many others) would be far more interested in owning MSFT stock if they fired the entire corp dev team and replaced them with a small laptop that merely issued orders to buy back stock every quarter.
Silicon Valley used to view MSFT as a rapacious shark. Now it sees MSFT as a well-heeled but dim tourist--an interloper that has more money than brains and is willing to spend exorbitant sums for shinky trinkets. Sadly, MSFT has warmed to the role.
- KaoruAoiShiho 14y agoObviously this is strategic. Enterprise Social has a lot of room to expand, MS can do things that Yammer can't do on their own.
- beedogs 14y agoCan, but won't. What have they done with Skype in the year and a half since purchasing it? I can't believe MSFT's shareholders haven't gotten rid of Ballmer yet.
- dewiz 14y agothere's been a lot of work on skype, most of it coming in the next months. it takes months or even years for two big companies to merge and align strategies, not to mention products and tech are often shared behind the curtains so you wouldn't know about progress until some big news or big release, ie. wait till win8
- hpatel 14y agoAlso, 1) potential to eventually sell MS products to yammer's customers. 2) being able to win other enterprise deals in competition with Salesforce/Oracle by being able to claim that you have something similar to Chatter.
- FixThisPOSSite 14y agoVery well stated. Microsoft will serve as a business-school case study in how a moribund juggernaut can survive well beyond its deserved lifespan.
- kwamenum86 14y agohttp://www.wolframalpha.com/input/?i=1.2+billion+%2F+msft+price http://www.wolframalpha.com/input/?i=1.2+billion+%2F+msft+pr...
- rplnt 14y agoI don't think there would be enough shares for that price so this is a very speculative comparison.