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Microsoft, Show Me The Money

Will Microsoft need debt to buy Yahoo?

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For the first time ever, Microsoft may be taking on some debt, as their offer of $44.6 billion of cash & stock for Yahoo sinks in with industry observers.

It’s a lot of money, even for the company that minted Bill Gates as one of the richest people in the world, and Paul Allen and Steve Ballmer as billionaires. Is it too much?

Recently, the bearish outlook of the Motley Fool suggested Microsoft’s best money-making days had passed. They cited the online division operating at a loss, the billion-dollar Red Ring of Death fiasco with the Xbox 360, and slow Vista adoption as reasons to think the worst of Microsoft.

Microsoft, Show Me The Money

“All you really need to ask yourself is why you’re invested in Microsoft in the first place. Is it because the company’s dominance happens to be in the high-margin software space? That palatial estate is toast, my friend,” wrote Rick Aristotle Munarriz.

He may have spoke too soon. Analyst John Byrne at Technology Business Research Inc. had this to say about Microsoft, cash, and the Yahoo deal:

Microsoft has just over $21 billion in cash and short-term liquidity, including about $19 billion that is effectively at its disposal to apply toward a Yahoo purchase. Assuming the terms remain as proposed ($44.6 billion, 50%/50% split between cash and stock) that would imply Microsoft would need $22.3 billion in cash. To the extent that the eventual price goes above the proposed amount, the amount of cash required would probably go up.

However, I would expect that the regulatory process would be lengthy and that an actual consummation would not happen until near the end of the year. Considering Microsoft generated $14 billion in net income last year, I think they would probably be in a position to have built up sufficient cash on hand by then. They would always have the option to issue commercial paper to fund short-term borrowing needs if they wanted to go that route, but they probably wouldn

Microsoft, Show Me The Money
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  • http://www.cyclelogicpress.com Partners in Grime

     Looking forward to searching on Microhoo.

    • Guest

      How come Bill Gates promote Yahoo as a mail service as they already have Hotmail? That have to remain as a question.

  • Guest

    it’s just a ridiculous sum of money for what you are actually buying…  what’s even worse is the guy in the 1st post ‘partners in grime’  using the name and homepage fields to his advantage. Everybody is always upto something. 

  • Alan Smith

    Mr. Pulver, you are so wrong about Microsoft.  Sorry, but you are just spouting off old myths that MS can bounce back and re-invent itself.   What recent examples can you give us?  Zune, Vista, Xbox, Windows Mobile, WInCE, the Tablet PC, Origmi, or what about "Bob"?  Duh-please!!!

  • http://databackup.infobulb.com Jawed Iqbal

    Microsoft is throwing this money into the gutter if they purchase yahoo; it’s not worth it, Yahoo is not worth it!

    These guys should pour that money into MSN and Live.com to make IT better instaed of reviving this portal on life support. Google is going to kill every search engine if these companies do not come up with new ideas and innivations for the search technology.