Cheap Solid State Computers Could Kill Microsoft

Eh-Wire writes "This is an interesting point made by a Clayton Hallmark on IndyMedia out of Argentina. He predicts that cheap Asian computing appliances with an Open Source Operating System on a chip will be the ultimate MS killer. References to the US$220 Mobilis out of India suggest the begining of newer, more powerful, and cheaper things to come. Mr. Hallmark also points to the success of the Wal-Mart cheap PC as proof the end is near for proprietory software. Overall an in interesting and thought provoking read."

Comments

Re:Hmmm. kill microsoft? or help them?

[Bazzalisk]

Have you heard of FlashROMs?

It's a nifty technology which allows a chip to be written to as well as read from, but remain persistant in the manner of a ROM. Very few so-called ROMs these days are actualy read-only -- you just write to them occasionaly, and read from them often.

Re:Not that likely...

[CaymanIslandCarpedie]

They've already agreed to piss away $37 billion for exactly those reasons - the stockholders were getting scared.

OK, I'm not sure how many times I'm going to have to hear this ;-) Its OK for tech types not to understand economics or financial markets (hey you cannot know everything), but then don't pretend like you do please.

First, the one-time bulk dividend you are refering to was approx 32 billion not 37 (not really important). Anyway, it will most likely actually be higher than that as that dividend was actually part of a three piece four year plan. Besides the one-time bulk divedend, MS also planned a stock buy-back and an additional raise in normal dividends over a four year period based on performance. This three part plan could equal as much as 75 billion over four years. Now I won't go over the calculations AGAIN, but basically with crazy assumptions to the low side, at the end of the four years MS will still have at least 30 billion in cash (more realistic numbers would have that number much closer to 40 billion).

OK, besides the numbers its important to understand WHY this is being done. No, its not because anyone is scared ;-) At the time of this decision, MS had almost 60 billion in cash (56 I believe at last reporting period). Also, at that point its market cap was just below 250 billion. Thats getting close to having 25% of thier market cap just sitting in cash. Another way to look at it is they had about 90 billion in assets on the balance sheet so that about 65% of assets in cash. Not good!!!

Now many will say "how can having that much cash not be good?". And that is a very fair question, and the fact that it isn't certainly can seem counter-intuitive on its face. However, when we all talk about the job of a corporation is to make money, we are talking mainly about making money for its shareholders (not to make the corporation itself rich). Yes, you do need to have some cash on hand (war-chest) and what that amount is, is not easy to calculate. It will depend on industry, company outlook, short and long term plans, etc, etc, etc. Coming up with a number for this is very complicated, but every company should have a target cash-on-hand number (thats what CFOs are for). Again, this number is not easy to calculate, but anyone looking at financials and understanding MS knew they had TOO MUCH cash. They are making money faster then they can spend it and unless they were planning the purcahse of IBM or something, it was just getting rediculous. The job of the corporation is to make money for shareholders and keep itself happy, but historically MS has just horded all of its cash. As a shareholder, I'm going to get a bit miffed if they already have more cash then they can resonably spend and just keep adding 10 billion a year to thier cash position instead of paying that out to shareholders.

While you think this was done out of fear, it really points in the opposite direction. When a company sees tough times ahead, they will try to raise thier cash reserves to be able to weather whatever is ahead. The tech industry has traditionally horded cash, because they are young want to be VERY safe (and may not have a "traditional" CFO). This payout if anything shows they are maturing as a company and feel VERY safe. As a rule (of course depending on other factors) you want to hold just enough cash to pay expenses and a nice "war-chest" just in case. In the case of MS, that war-chest was getting rediculous to the point of many seeing it as plain irresponsible. Cash like most other things isn't always more == better.

A very basic explaination about corporations cash. If you want to do more reading on this just google for "too much cash in reserves" and you can find plenty of discussion on this.