Comment pfft petty cash (Score 1) 1186
US$613 million. Petty cash for M$. According to the Canada Globe and Mail, the market capitalization of Microsoft is approximately $260-billion
We can look to the past as a guide, though. For the past year and a half, Microsoft has produced about $4-billion a quarter in cash flow from operations, on average. It doesn't have to reinvest much -- say, 10 per cent of that amount. To be conservative, we'll say capital expenses are about $500-million, leaving the investor with $3.5-billion a quarter, or $14-billion a year in free cash flow.
The market capitalization of the company, at yesterday's close, is about $260-billion, but that number doesn't reflect the oodles of stock options held by employees, which some day may dilute the existing shareholders. To be on the safe side, you could build in a cushion; say it would take $300-billion to buy the whole company.
It wouldn't really cost that much because Microsoft has a laughably conservative balance sheet, with $53-billion in cash and short-term investments and no debt. But ignore that cash hoard and ask yourself: would you pay $300-billion for a $14-billion annual stream of cash? If you think of it like a bond, it's a free-cash-flow yield of about 4.7 per cent, a nice premium on U.S. Treasuries (the 10-year note currently yields 3.7 per cent). And that assumes the company doesn't grow again, ever. [source]
We can look to the past as a guide, though. For the past year and a half, Microsoft has produced about $4-billion a quarter in cash flow from operations, on average. It doesn't have to reinvest much -- say, 10 per cent of that amount. To be conservative, we'll say capital expenses are about $500-million, leaving the investor with $3.5-billion a quarter, or $14-billion a year in free cash flow.
The market capitalization of the company, at yesterday's close, is about $260-billion, but that number doesn't reflect the oodles of stock options held by employees, which some day may dilute the existing shareholders. To be on the safe side, you could build in a cushion; say it would take $300-billion to buy the whole company.
It wouldn't really cost that much because Microsoft has a laughably conservative balance sheet, with $53-billion in cash and short-term investments and no debt. But ignore that cash hoard and ask yourself: would you pay $300-billion for a $14-billion annual stream of cash? If you think of it like a bond, it's a free-cash-flow yield of about 4.7 per cent, a nice premium on U.S. Treasuries (the 10-year note currently yields 3.7 per cent). And that assumes the company doesn't grow again, ever. [source]
