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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.
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.
That would have to be one hell of a stock swap since IBM's current market cap is $137 billion.
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.