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Why would you, as a shareholder, want a company to become profitable if it's not going to pay dividend anyway? If anything, shareholders should push tech compa

Why would you, as a shareholder, want a company to become profitable if it's not going to pay dividend anyway? If anything, shareholders should push tech companies to reinvest every spare cent, assuming it already figured out how to make money to stay afloat. Raking cash and sitting on it is an awful mode: Google and Microsoft grow suboptimally because of this.

prostoalex 13y ago
Because cash, even when held in an account without payout, is easier to value than any other asset or investment. It's also a cushion for a down cycle in the global economy.
- guard-of-terra 13y ago
  Tech companies do not care about up cycles and down cycles. They grow in both. I fail to remember when cash helped struggling tech company. Sun? Yahoo? Who could make better use of cash in the time of struggle than they could in the time of growth and ability? Tech companies do not need to hoard cash. They never die because of lack of cash. They always get murdered by more able competitor or innovation in their field. Thus, preferring to keep cash instead of investing is basically a crime for one. If you cate about assets and cushions, maybe you should invest in your pillow instead?
  - uptown 13y ago
    "They never die because of lack of cash. They always get murdered by more able competitor or innovation in their field." Yet cash allows them to respond to those competitors as necessary. I see Facebook's acquisition of Instagram as both a strategic and defensive move. Strategic because they see photos as the primary focus of what gets shared on their social network. Defensive to prevent Google or Apple or someone else from jump-starting their own social platform. Cash affords a company the ability to be agile when necessary.
    - guard-of-terra 13y ago
      If you respond you're losing already. What you should be doing is innovating, running circles around other companies and make them respond to you by bleeding cash. Having cash is nice, but if you can invest in raw growth makes zero sense not to.
      - true_religion 13y ago
        I don't think it is possible to be a "winning" company all the time. If that were so, then only a single winner would be dominating the entire industry.
      - prostoalex 13y ago
        By that logic any company with more than one acquisition is a failure. Build vs buy analysis still applies, and "running circles around" could get expensive, as at early stage it's difficult to tell which innovations will pan out and which will fail.
  - prostoalex 13y ago
    Microsoft's online business, for example, struggles, but cash helps to assuage the fears. Same with Yahoo, unimpressive performance and growth overall, sweet cash from Alibaba transaction kept investors excited and allowed them to grow via acquisitions. Apple, for one, negotiates better manufacturing deals due to the wide knowledge of them having a fat checking account http://www.quora.com/Apple-Inc-2/What-would-be-a-good-use-of-Apples-110-2+-billion-in-cash/answers/612608 http://www.quora.com/Apple-Inc-2/What-would-be-a-good-use-of... A lot of dealings in the offline world (datacenter leases, procuring manufacturing capacity, loans of credit, bond issuance, contracting suppliers) is easier if you have a fat account to show.
    - bcrawl 13y ago
      please put a disclaimer about quora's log in requirement shenanigans. I "signed" up using one of my gmail acct, not sure if my contacts got spammed and ended up never seeing the actual post because the pop up never closed.
      - codezero 13y ago
        If you add ?share=1 to the URL, it won't have a sign-up requirement.
      - kalleboo 13y ago
        Web Inspector is your friend. Just delete the div id=_modal_signup_wrapper and the overlay is gone.
        codezero 13y ago
        If you add ?share=1 to the URL, it won't have a sign-up requirement.
  - cremnob 13y ago
    Is this a joke? Do you realize many dot-coms went under because of the bubble bursting and not being able to raise money in the capital markets? Venture capital money dried up and they weren't profitable so they had no cash.
prewett 13y ago
As a shareholder, you don't want a dividend IF the company can invest that money at a higher rate of return than you can. Berkshire Hathaway is the textbook example of this: they have not paid a dividend in 40 years, but the book value has grown by about 20% every year (averaged out). I would not say that Google and Microsoft necessarily grow suboptimally because they have a lot of cash sitting around. The current opportunities may not be worth investing in. Berkshire has tons of cash, waiting for a good opportunity. And when it comes, cash gets poured into it.
- laxatives 13y ago
  I think thats only true if you have a lot of faith in the company. If you were guaranteed greater return on reinvest, of course that would be better. But all you're getting is less (or no) money now and the promise for more money later. If this isn't something your emotionally attached to, it sounds like you're just getting screwed.

prostoalex 13y ago

Because cash, even when held in an account without payout, is easier to value than any other asset or investment. It's also a cushion for a down cycle in the global economy.

guard-of-terra 13y ago
Tech companies do not care about up cycles and down cycles. They grow in both. I fail to remember when cash helped struggling tech company. Sun? Yahoo? Who could make better use of cash in the time of struggle than they could in the time of growth and ability? Tech companies do not need to hoard cash. They never die because of lack of cash. They always get murdered by more able competitor or innovation in their field. Thus, preferring to keep cash instead of investing is basically a crime for one. If you cate about assets and cushions, maybe you should invest in your pillow instead?
- uptown 13y ago
  "They never die because of lack of cash. They always get murdered by more able competitor or innovation in their field." Yet cash allows them to respond to those competitors as necessary. I see Facebook's acquisition of Instagram as both a strategic and defensive move. Strategic because they see photos as the primary focus of what gets shared on their social network. Defensive to prevent Google or Apple or someone else from jump-starting their own social platform. Cash affords a company the ability to be agile when necessary.
  - guard-of-terra 13y ago
    If you respond you're losing already. What you should be doing is innovating, running circles around other companies and make them respond to you by bleeding cash. Having cash is nice, but if you can invest in raw growth makes zero sense not to.
    - true_religion 13y ago
      I don't think it is possible to be a "winning" company all the time. If that were so, then only a single winner would be dominating the entire industry.
    - prostoalex 13y ago
      By that logic any company with more than one acquisition is a failure. Build vs buy analysis still applies, and "running circles around" could get expensive, as at early stage it's difficult to tell which innovations will pan out and which will fail.
- prostoalex 13y ago
  Microsoft's online business, for example, struggles, but cash helps to assuage the fears. Same with Yahoo, unimpressive performance and growth overall, sweet cash from Alibaba transaction kept investors excited and allowed them to grow via acquisitions. Apple, for one, negotiates better manufacturing deals due to the wide knowledge of them having a fat checking account http://www.quora.com/Apple-Inc-2/What-would-be-a-good-use-of-Apples-110-2+-billion-in-cash/answers/612608 http://www.quora.com/Apple-Inc-2/What-would-be-a-good-use-of... A lot of dealings in the offline world (datacenter leases, procuring manufacturing capacity, loans of credit, bond issuance, contracting suppliers) is easier if you have a fat account to show.
  - bcrawl 13y ago
    please put a disclaimer about quora's log in requirement shenanigans. I "signed" up using one of my gmail acct, not sure if my contacts got spammed and ended up never seeing the actual post because the pop up never closed.
    - codezero 13y ago
      If you add ?share=1 to the URL, it won't have a sign-up requirement.
    - kalleboo 13y ago
      Web Inspector is your friend. Just delete the div id=_modal_signup_wrapper and the overlay is gone.
      - codezero 13y ago
        If you add ?share=1 to the URL, it won't have a sign-up requirement.
- cremnob 13y ago
  Is this a joke? Do you realize many dot-coms went under because of the bubble bursting and not being able to raise money in the capital markets? Venture capital money dried up and they weren't profitable so they had no cash.

prewett 13y ago

As a shareholder, you don't want a dividend IF the company can invest that money at a higher rate of return than you can. Berkshire Hathaway is the textbook example of this: they have not paid a dividend in 40 years, but the book value has grown by about 20% every year (averaged out). I would not say that Google and Microsoft necessarily grow suboptimally because they have a lot of cash sitting around. The current opportunities may not be worth investing in. Berkshire has tons of cash, waiting for a good opportunity. And when it comes, cash gets poured into it.

laxatives 13y ago
I think thats only true if you have a lot of faith in the company. If you were guaranteed greater return on reinvest, of course that would be better. But all you're getting is less (or no) money now and the promise for more money later. If this isn't something your emotionally attached to, it sounds like you're just getting screwed.