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Microsoft Raises $3.8B in Bond Sale
pfleming writes "Microsoft quietly, or not so quietly, raised some cheap cash in bond sales yesterday. For a company that already has a huge cash war chest and doesn't carry debt, what is the incentive to sell nearly $4 billion in bonds? From the article: 'Microsoft is sitting on $25 billion in cash, so the company doesn't need the bond proceeds "unless they have something big in mind," says Reena Aggarwal, professor of finance at Georgetown University's McDonough School of Business.'"
Microsoft is becoming a mature company and they are operating like one. The will use this money to repurchase their own stock while it is at a discount. They will then keep the dividends on the stock for the company. This will continue until the stock price gets high again. They will then resell the stock for a profit and resources when they need it.
Yes, I am a trader.
There is a feeling that the credit markets should be recovering, and Microsoft, with a AAA rating, is capitalizing on that by offering a low level of risk, which will entice bond buyers looking to get back in, but who are still wary. Combine that with a low stock price, and it's easy to see that they're going to buy back some of their outstanding equity.
It's not mentioned in the summary, but this is the first debt offering in Microsoft's history.
The article claims MSFT is sitting on $25 million in cash. This is frankly false. What MSFT is sitting on is $25 million in "Cash and Short Term Savings." In short, a combination of Cash and Stock prices, which are not being adjusted as the companies values go up and down, and do not need to be adjusted to actual street value at the present time. What they do have is $8 billion in cash on hand, down from $12 billion a year prior (as of latest SEC filing in March). If I'd lost 1/3rd of my cash in less than a year, I'd be doing a bond right now as well.
Karma Whoring for Fun and Profit.
And that article states they purposefully reduced cash by buying back outstanding stock and paying dividends - they didn't lose it all...
> Yahoo
Steve Ballmer just did a session at the Stanford Entrepreneurial Thought Leaders Seminar where he was asked about the Yahoo acquisition. He said something to the effect of "I still think it was a good idea". Who knows, maybe you're right...
The Army reading list
No, any bond broker should carry them. E*Trade has some for offer right now. And you don't need "many thousands". You do need one thousand, though, as bonds are typically sold with a face value of $1000.
Microsoft is currently working on a $40B stock buy back, having recently completed ANOTHER $40B stock buy back. That's the amusing thing about the people who say that Apple is getting bigger than MS, based purely on cash in hand. Yes, MSFT "only" has $25B cash. That's after buying back $80B of stock.
Dude,
$3.8 billion divided by $1000/bond is 3.8 million bonds.
That would have to be one hell of a stock swap since IBM's current market cap is $137 billion.
Microsoft's market capitalisation is $177bn, Apples is $111bn, so there is almost as much chance of Apple buying Microsoft as there is of Microsoft buying Apple.
Also, Apple has slightly more cash in the bank than Microsoft - $24.49bn vs $23.66bn.
I'm in agreement that it is wrong, but that is what it says in the SEC filings for Microsoft. They have $18 million as of March 31st in "Short Term Investments", which can and does include stock, treasury bills, and short term cd's. Microsoft's listings of Short Term Investments also includes securities held as collateral, several billion worth. So, we are looking at an aged company, it is no longer operating on rapid growth, but is instead locking down in preparation for a recession and possible product rollout over the next 6 months. It is a watershed day for Microsoft, it has finally grown up.
Karma Whoring for Fun and Profit.
Oops. You're quite correct.
Here's the explanation on Bloomberg:
Microsoft... plans to help fund a $40 billion share repurchase program, as well as build data centers to help narrow the gap with Internet search leader Google Inc. Microsoft has also said it wants to amass cash as a weak economy provides opportunities to acquire small and midsize companies.
I knew that MS didn't have any debt. But somehow my feeble brain didn't connect that with the idea that they couldn't have any outstanding bonds...
Anyway, we're both wrong. Bloomberg is reporting that it's mostly about stock buyback, along with a little capital improvement and being prepared for any small companies they can grab at today's discount prices.