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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.'"
Obvious first idea.
The name is bonds... Microsoft Bonds.
http://www.geoffreylandis.com
8 Billion to buy Sun out from under Oracle.
The rest for the antitrust lawsuits.
If I were God, wouldn't I protect my churches from acts of me?
Maybe they want to buy GM?
It may be that they're hedging their bets against a possible dry spell in their business. Better to get the cash now, while their bond rating is good and they can get a low interest rate, than trying to issue bonds when they're not looking so hot.
They're moving off planet to avoid problems with anti-trust regulation. Also, chairs thrown from the moon will have much greater impact on earth based targets.
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.
I'm guessing that Microsoft has about 4 dozen guys that know so much about finance, they would literally make you slit your wrists should you ever be matched up against them in a test of financial knowledge. Maybe, just maybe, they know what they're doing more than some random dude Slashdotting from work.
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.
Actually, now is a great time to issue bonds. Interest rates are extremely low (particularly for well-rated bonds which MS bonds assuredly will be) so if they can expect even a modest return on the bonds, they'll do well.
My gut tells me that this is a hedge against inflation, not a cash-raising effort for some diabolical plan.
On the other hand, this may be part of Gatus's effort to collaborate with Joba to create the One True OS with Global Web Search in order to stop Googol the Destroyer.
When last we saw our heroes they had embarked on their quest to stop Googol the Destroyer and his infernal plan to invoke the End of Days via the Rite of a Million Targeted Ads, but the rogue druid Stallmanx was hampering their efforts by biasing the common sorceror against them.
"Joba," the Oracle at Redwood Shores proclaimed, "You must harness the power of all the sorcerors of the land to stop Googol. Only by having them all contribute to the One True yada-yada can you stop Googol. I have spoken!"
And so Joba consulted with Gatus. "Gatus, how can we get all the other sorcerors to contribute? They don't like us, that bearded wretch Stallmanx has turned them all against us."
Gatus thought and thought, but in the end he resorted to his base nature... "I will buy the sorcerors we need! I'm short of cash though, I need another 5 billion. Maybe I could issue some bonds.".
Intrigued, Joba responded. "Yes, you can buy the greedy ones. I can use my powers of seduction and envy to make them all want to be like me. Yes, I will subvert the Ministers of Fashion to convert the low self-esteem rabble to our cause."
And so Gatus and Joba began to plan.
Meanwhile, the crack team of evil underlords at Google were busy with their database of potential ways for the world to be saved, and developing their counter-strategies. The acolytes of Googol the Destroyer were busily releasing the Webcrawling Spiders of Damnation upon the world, to catch information to sacrifice to their terrible leader, who devoured data with great appetite and gobsmacking satisfaction.
But Stallmanx is quiet... what is he working on in his secret laboratory? What nefarious ritual is he preparing to thwart our heroes? Will Joba and Gatus be able to overcome his resistance? Will we ever find out what wonders lie beneath the surface of Stallmanx's Beard of Druidic Prowess? Can Googol the Destroyer be thwarted?
Tune in to next week's episode of Google the Destroyer!
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Microsoft does not want to spend its cash hoard of $25 billion when the interest rate on bonds is essentially at zero -- relative to inflation.
Given ALL the problems we see with corporations that carry debt, why on earth Microsoft would want to piss away a giant cash reserve AND borrow money ...?
Perhaps they're expecting significant inflation, or even hyperinflation, of dollars (as is everybody with the least clue about the theories of the Austrian school of economics.)
Interest rates are massively depressed by the "printing press money" currently pouring out of Washington. The expectation that the money will devalue drastically over the next couple quarters to couple years (especially now that China has stopped buying US bonds). Meanwhile the artificially depressed (compared to borrowing only savings) interest rates continue the diversion of "stuff" from where it can build infrastructure to make a future profit and into either projects that can't be finished or won't have customers when they're done or immediate consumption. This turns a recession into a depression. It's exactly what happened to create the Great Depression, but the government is doing it more this time around and with no safety net from a gold standard - so the US could end up more like Weimar Germany than the US of the '30s.
If you believe that, the logical thing to do is to grab some of the dollars at the low interest rate before the inflation gets figured into their price and use them to buy assets that won't inflate or disintegrate in a depression. Pick off undervalued resources - commodities, potentially profitable companies, etc. Then when the inflation hits, cash things like your gold reserves and pay off the notes in inflated dollars.
To give you an idea of what hyperinflation is like: In the first year and a half after the Treaty of Versaille's reparation section took effect, the money inflated so much that, were it to happen here, a $200,000 mortgage could be paid off completely for the price of a slice of toast. (Over 9 years it inflated by a trillion-to-one, before they instituted a new money that was more solidly backed.)
= = =
Then again:
- Maybe they see an acquisition target and need a bit more cash.
- Maybe they ARE, or expect to become, an acquisition target (due to the cash reserves and an expectation of a stock price drop) and are working on looking less attractive. B-)
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
No, they don't "need" VMware themselves. They have a product which "fits" that niche - "that niche" being Windows desktop and server virtualization products (and only for MS's more expensive OS versions).
But if you consider the facts of VMware being cross-platform for both host and client OS, supporting a myriad more client operating systems than MS does, and the fact that VMware is working on emulation applications for mobile devices, well: the picture changes somewhat.
VMware is only competition in the very small world of Windows on Windows emulation. You have a significant diminished return on your hardware when your virtual hardware is sitting on top of a Microsoft OS: you need a lot more hardware.
Not only that, but VMware is heavily used in Linux by both companies and individuals. They offer the Only mature set of virtualization tools for OS X and Linux. Yes, Linux has KVM and Xen, and there's also Virtualbox - but Linux kernel virtualization lacks a cohesive, 'available' interface for management, and Virtualbox is easily several years behind even VMware workstation in terms of features, stability, and general solidness.
If MS were to buy VMware, they'd offer it as a move towards expanding their virtualization services to other OSes - to 'infuse' MS tech into VMware products to make them better. Then, the Windows versions of VMware products would slowly become much, much more "windowsy", while the Linux and Mac versions stagnate in features and usability - while useless or half-broken features are added, making the package as a whole less usable. Eventually, they'll be canceled outright.
That would be a very, very bad thing; after all, we IT folks are trying to move towards a more fully virtualized software/hardware environment: it makes things easier for us. Microsoft, on the other hand, has spent its entire existence making new hardware slow and glitchy with new OS releases. They want to maintain and perpetuate the status quo, which is a world of MS domination in every realm of a network's architecture.
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