The Ghost In The Machine <ewill@xxxxxxxxxxxxxxxxxxxxxxx> espoused:
> In comp.os.linux.advocacy, Mark Kent
><mark.kent@xxxxxxxxxxx>
> wrote
> on Tue, 5 Feb 2008 18:24:10 +0000
><a7mm75-4b3.ln1@xxxxxxxxxxxxxxxxxxxxxx>:
>> Mustafa Korn <korn@xxxxxxxxxx> espoused:
>>>
>>> "Hadron" <hadronquark@xxxxxxxxxxxxxx> wrote in message
>>> news:fo7d8o$2cu$2@xxxxxxxxxxxxxxxxxxxxxxxxxxxx
>>>> Jerry McBride <jmcbride@xxxxxxxxxx> writes:
>>>>
>>>>> Roy Schestowitz wrote:
>>>>>
>>>>>> Microsoft and the American way
>>>>>>
>>>>>> ,----[ Quote ]
>>>>>> | An interesting side-note on the potential Yahoo-Microsoft deal:
>>>>>> | Microsoft has only $17B in cash/liquid reserves, but has bid $44.6B
>>>>>> for
>>>>>> | Yahoo.
>>>>>> `----
>>>>>>
>>>>>> http://warpedvisions.org/2008/02/03/microsoft-and-the-american-way/
>>>>>>
>>>>>
>>>>> $17 billion cash? Didn't they once sit on a $60 billion cash reserve at
>>>>> one
>>>>> time? Wow, where did all the cash go?
>>>>
>>>> Why would you want to know? What do you know about their purchases and
>>>> re-investments? Hint : go look at the cash sheets. *snigger* Mark Kent
>>>> will show you how.
>>>
>>>
>>> Most of the fools here think that the best thing for a company to do with
>>> "cash" is to hide it under a mattress or something. Somehow they think that
>>> having a huge pile of money just sitting there is somehow making the most of
>>> it. They are not familiar with concepts like investing the pile of cash and
>>> buying other companies and investing in technologies in order to grow the
>>> business.
>>>
>>
>> Unfortunately, Scott (Mr Meyer, etc.), you don't seem to understand that
>> investments appear on balance sheets as assets.
>>
>> The cash is *gone*.
>>
>
> Define "gone"; the 31-Dec-07 balance sheet suggests 7.5B
> in "cash and cash equivalents", a further 13.6B in short
> term investments, and another 13.1B in net receivables.
> Throw in inventory and other current assets and one gets
> 37.8B, give or take. [*]
>
> http://finance.yahoo.com/q/bs?s=MSFT
>
> This is down from 48.7B of current assets as of 2 years back,
> and 40.2B as of the end of last FY:
>
> http://finance.yahoo.com/q/bs?s=MSFT&annual
>
> but still disgustingly healthy -- at least at the moment.
> One might also notice that they have *more* cash and cash
> equivalents now than they did in 2005 (6.1B as opposed to
> 4.9B, on the annual report). Where they're getting it
> from, I'm not entirely certain, though they've lost quite
> a bit in short term investments -- from 32.9B to 17.3B.
> That's the part that's apparently wandered off.
>
> For comparison's sake, IBM has 46.6B of current assets,
> but one would expect that; they get about half again as
> much revenue as Microsoft (but with less gross profit and
> net income).
>
> [*] presumably, the cash and cash equivalents is what's in their
> "wallet"; current assets is what's in their "checking account".
>
If you look at the net assets lines over the last 3 years, you can see
that net assets have fallen from US$45bn to US$25bn, ie., almost halved,
with US$20bn lost, gone, disappeared, whatever. Look at the balance
sheet carefully, Microsoft have huge liabilities, which are growing very
fast indeed on those sheets.
There are several uses to which the cash could have been put, of course,
and my suspicion is that the "lost" asset has gone on the following in
some measure:
1. Share buy-back (direct losses)
2. Dividend payments (direct losses)
3. Ill-advised acquisitions (ie., buy company for $4bn, subsequent value
$2bn)
4. Loss-making divisions (Xbox, Zune, Windows etc.)
Assuming a linear rate, Microsoft will have zero assets in ~4 years,
ie., at 2012. If they go ahead with the Yahoo purchase, this date will
probably come forward.
The real question then will be how the stock markets react. In principle,
the share price of a company should reflect either it's present
fire-sale value for a company which is failing, or a discounted future
value assuming it has major growth prospects. Microsoft are still being
valued as a "growth" company, but from the evidence, at least to those
of us who watch these markets closely (probably including most people
in Cola), it should be clear that Microsoft are simply not having great
success any more.
Microsoft still have substantial revenues, of course, so it all depends
on what the stock-markets do. Should there be a run, as Microsoft look
more and more like an Enron or Worldcom, then we could see them
bought-out either as a going concern (say, by Oracle?), or buy a
fund-management company in order to be stripped down, but as there is
little in the way of saleable assets, it's hard to see how that
valuation could be made.
Unlike car companies which have production plants, mining companies
which have mines and mining rights, telcos which have networks, software
houses are not in possession of any saleable assets of any significance.
Clearly, Microsoft's astonishing drive into the patent world shows that
they have recognised this vulnerability and are hoping that the patents
could have some value, hence the drive in Nafta, the EU and elsewhere
have permit software patents (it's to hold up Microsoft!).
So, Microsoft are in a serious panic with respect to the Yahoo purchase.
Currently, in order to purchase, they'll need an additional US$25bn from
somewhere (loans, share swaps, etc.), but in three years, they'd need
US$45bn from somewhere. Microsoft need to move very very quickly
indeed. Once they have moved, however, they'll not be able to afford to
purchase anything substantial again, at least, not for a very long time,
so it's likekly to be their last major acquisition. This probably
doesn't bode all that well for Novell, who will likely be cut loose at
some point.
--
| Mark Kent -- mark at ellandroad dot demon dot co dot uk |
| Cola faq: http://www.faqs.org/faqs/linux/advocacy/faq-and-primer/ |
| Cola trolls: http://colatrolls.blogspot.com/ |
| My (new) blog: http://www.thereisnomagic.org |
|
|
