September 23, 2008

 

Contrast

Some large companies are filing for bankruptcies. Some large companies need the shelter of the US govt or other larger companies. Some companies have lost 50-90% of their market cap which runs into hundreds of billions of dollars. It is all gloomy picture out there.

And then there is Microsoft. They plan to buy back their shares worth $40 billion. Which means they are earning a lot more (and a lot faster) than they plan to spend. Now, this is not such a bad problem, especially in the light of the havoc in financial world. But, isn't there a better use of this cash? I am sure the super-talented team at Microsoft must have given it a serious thought.

How about buying some of the companies out there? I am sure there are enough of them on sale at right price. What will be their source of cash when they buy, say, Facebook for $15bn? Or are they confident that by the time they want to buy entire Facebook, they will again be flush with cash?

Or how about leaving some cash on the table? I mean, charging users a little less. Like say $0 for Windows Vista. At least they will buy some goodwill in this way, because the $40 bn buyback hasn't really perked up their stock.

Of course, all these are possibly stupid ideas from a clueless guy who doesn't know how to run companies, let alone a supremely successful 8000-lb gorilla. (Yes, it is 8000 lb and not 800 lb.)

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Comments:
umm.. you think it's because they think the price is low enough to warrant it? they'd know their worth better than anyone else, and there has been a huge drop in the last one year.
 
Not sure if this buyback is due to their assessment of price being low. Their performance for a year is pretty much same as Nasdaq.

Also, they are increasing the dividend payout. This, I suppose, indicates they want to return money to investors.
 
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