17-01-2003 11:35									#91
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BTW, you want to see how to run a company into the ground? Look no farther than Sun Microsystems:

http://news.com.com/2100-1001-981022.html

A $2.28B quarterly loss. LOL.

	17-01-2003 11:37									#92
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quote: Originally posted by GP Well...there is certainly an argument against having too much cash like that inside a tech company. That it is better to return the money to the shareholders and let them invest it as they see fit. And run the company off of earnings. It makes them more hungry that way if they don't have that cash cushion.

Here's a summary of a study done in 1986:

"Yet another theoretical perspective on dividends can be traced back to Michael Jensen, currently an emeritus professor of business administration at Harvard Business School. Writing in 1986 in the American Economic Review, Prof. Jensen speculated that companies would be less efficient to the extent that they have cash in excess of what is needed to fund all current projects.

Prof. Jensen's argument is that cash too often burns a hole in the corporate pocketbook, prompting managers to invest it unwisely. Investors therefore should figure out "how to motivate managers to disgorge the cash."

Though Microsoft's newly announced dividend represents but a small percentage of its cash, on Prof. Jensen's view it is at least a step in the right direction."

	17-01-2003 11:37									#93
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Do you own a Bill Gates blowup doll, Asher?

	17-01-2003 11:37									#94
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quote: BTW, Drake, if you still insist they have no possible need for that much cash, remember that they would have bought Nintendo for $25B had Nintendo agreed to it.

What are they going to do with the other $18 billion? I doubt they'll be aquiring any companies larger than Nintendo is, so why do they need all that cash lying around?

	17-01-2003 11:39									#95
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quote: Originally posted by Asher Do you think it makes them too powerful?

The argument is that it makes them inefficient and wasteful.

	17-01-2003 11:39									#96
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quote: Originally posted by Frogger Do you own a Bill Gates blowup doll, Asher?

Why would I need a blowup doll when I can get the real thing...

quote: What are they going to do with the other $18 billion? I doubt they'll be aquiring any companies larger than Nintendo is, so why do they need all that cash lying around?

They compete in more than one market.

What if they decide to buy Nintendo, TiVo, Nokia, etc. all at one time?

More seriously, that money gives MS a good source of income.

Intel does something similar, Intel Capital has made Intel billions of dollars...

	17-01-2003 11:41									#97
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quote: Originally posted by JohnT The argument is that it makes them inefficient and wasteful.

Hmm. That may work as an argument.

How does it fly, however, when the cash pile continues to grow and the company continues to expand?

	17-01-2003 11:50									#98
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quote: Originally posted by Asher Why do you think they have too much cash?

Its a common view by finance professors. The reason they have too much cash is that they don't need that cash to cover any reasonalbe reverse that they might expect. And investors can invest the money in short term investments (or other things more effectively than MS.) It gets technical here, but it has to do with portfolio diversification. (CAPM theory.) There is no advantage to have diversity within a company. Its better to let shareholders diversify independantly. As it is right now, MSFT is a combination of an OS company and sack of cash.

The cash can also have harmful effects because it allows managment to relax and because it makes it easier to do questionable mergers. (If the company really needs to do a deal and the syntergy is there, they can always raise debt or just do a stock swap. There is no need to have the cash sitting under the mattress (yeah I know its in an account.)

quote: you think it makes them too powerful?

no.

	17-01-2003 11:52									#99
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quote: Originally posted by Asher Hmm. That may work as an argument. How does it fly, however, when the cash pile continues to grow and the company continues to expand?

The cash is not what makes them expand. It is their dominant position in Office and Windows and their business and CS savvy to stay there. Yeah they aer expanding. But could they do better?

They don't need the cash. It doesn't help. And it could hurt.

	17-01-2003 11:54									#100
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quote: Originally posted by GP The cash is not what makes them expand. It is their dominant position in Office and Windows and their business and CS savvy to stay there. Yeah they aer expanding. But could they do better? They don't need the cash. It doesn't help. And it could hurt.

They use the cash to aid in expansion into new markets.

See: Xbox. SPOT.

I would think that helps them expand.

	17-01-2003 11:54									#101
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quote: Originally posted by JohnT Here's a summary of a study done in 1986: "Yet another theoretical perspective on dividends can be traced back to Michael Jensen, currently an emeritus professor of business administration at Harvard Business School. Writing in 1986 in the American Economic Review, Prof. Jensen speculated that companies would be less efficient to the extent that they have cash in excess of what is needed to fund all current projects. Prof. Jensen's argument is that cash too often burns a hole in the corporate pocketbook, prompting managers to invest it unwisely. Investors therefore should figure out "how to motivate managers to disgorge the cash." Though Microsoft's newly announced dividend represents but a small percentage of its cash, on Prof. Jensen's view it is at least a step in the right direction."

Well stated.

	17-01-2003 11:59									#102
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quote: Originally posted by Asher They use the cash to aid in expansion into new markets. See: Xbox. SPOT. I would think that helps them expand.

No. The cash stash is expanding. They are not plowing it back into the business. In that case, it would be staying the same or shrinking. I have no problem with them using earnings to finance (good) growth initiatives. HAving all that cash though is not having it in a project. It's not in 2 places at once. A stash like that makes it dangerous that they will overpay for a Nintendo. It also helps to ward off any possibility of a takeover attempt (something good for management and bad for shareholders...who WANT their company to get attacked by raiders.)*


*I think MSFT's size and the success in how it is run make it an unlikely takeover target regardless. I;m making a more general point here. Management often likes having that stash there so that they can burn it on proxy fights and greenmail and stuff like that if the raider comes calling.

	17-01-2003 12:00									#103
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This has actually turned out to be a pretty informative thread. Thanks JohnT, Frogger and GP.

	17-01-2003 12:03									#104
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quote: Originally posted by GP No. The cash stash is expanding.

Maybe that's why they've started giving out dividends now.

It may not make a dent in their pile now, but giving out dividends per year will slow the growth, wouldn't it? In addition it makes it a slightly more attractive stock.

I still think they would have used (and probably have plans to use) tons of that cash, but are waiting until the anti-trust bru-haha calms down before making their moves.

Why else would they hoarde it?

	17-01-2003 12:11									#105
	Inflate your Upload Space

Like I said earlier, from everything I read MS is not, repeat not going to be paying dividends out of retained earnings (the $43b) but out of current earnings.

You're welcome Drake.

And GP? I quoted that... it wasn't original by me.

	17-01-2003 12:12									#106
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Good posts, GP! That money is doing no good, and should really be paid to the investors. Sure, that money probably yields 3-5% per annum, but that is nowhere near the ~40% (talking out of memory) profit they make of their sales.

But the main point is that while MS well could use all that cash to buy several other corporations and thus get much bigger, it doesn't mean the synergy will make the new huge MS-empire better. A shareholder would most probably be better off by getting the cash and invest the money himself. There's an incredible arrogance in management thinking their tenth-best investment idea is better than their shareholders' first-best idea.

	17-01-2003 12:16									#107
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quote: Originally posted by JohnT Like I said earlier, from everything I read MS is not, repeat not going to be paying dividends out of retained earnings (the $43b) but out of current earnings.

Right...
which means less profit each year is going to the company, which means the stash should grow slower, right?

BTW, does anyone know where I can find detailed information on MS' report? I want to know in particular the performance of the Home Entertainment division, I know their revenues are up over $1B now, but I don't know net profit (or loss)...