With a King’s Ransom in Cash, Why Is There Still No Buying Spree in the Tech Space Yet?
by Kara Swisher
Posted on February 17, 2009 at 7:00 AM PT
Even in the midst of the economic meltdown, consider these mega-billion-dollar cash hoards of big tech companies:
Microsoft (MSFT): $20.7 billion
Cisco (CSCO): $29.5 billion
Apple (AAPL): $25.6 billion
Intel (INTC): $11.8 billion
Oracle (ORCL): $10.6 billion
Hewlett-Packard (HPQ): $10.2 billion
Google (GOOG): $15.9 billion
Yahoo (YHOO): $3.5 billion
Of this moneybags list, Apple and Google have zero debt, with the others not having much at all to speak of. Better still, all typically generate a whole lot of cash flow quarterly, even in the downturn.
And since very few tech companies like to hand over dividends or buy back much stock–kind of a minor sacrilege in the space since it means they have no innovative new ideas to fund–BoomTown asked a big exec at one of these companies when the buying spree of both public and private companies might begin.
“Like everyone else, we are waiting for the bottom,” said the exec. “So who knows?”
Said another: “No one wants to buy when prices could just keep going down. The trick is to buy before the really great deals out there collapse.”
And, even as some tasty targets are suffering and might need a lifeline, none of them want to necessarily sell out at all-time lows either.
“We will start eating our toner and paper first,” joked one start-up exec, whose company is increasingly strapped for cash, even after a number of cost-cutting moves.
Interestingly, the only standout in the buying game has been Oracle, which has been in bargain-hunting mode, making 10 acquisitions for about $750 million in the last year, according to an article in The Wall Street Journal today.
While this amount is small potatoes to Oracle, which has typically been known for doing huge merger and acquisition deals, it is still some activity in a decidedly inactive space.
Oracle has especially focused on private firms, as the private-equity investing and venture capital has dried up and IPOs are an impossible dream.
And while another well-known M&A addict, Cisco, has recently issued $4 billion in debt to fund more purchases, and Microsoft execs have noted recently that it is a buyer’s market, it seems Oracle CEO Larry Ellison is the only one currently putting his big money where his big mouth is.
So, when do you think tech companies should commence to gobbling too?
Comments
It seems strange there was never any talk of Cisco buying Yahoo. Cisco has the back end and the set top boxes – Yahoo has the user accounts and the services. Seems like there’d be something at least considering there.
Posted by Brendan Walsh at February 17th, 2009 at 7:22 amIt’s painful to watch how slowly the digital living room evolves.
As for cash, I’m long on three of these stocks and glad they have plenty to wait out the storm. Apple in particular shows great restraint in not buying for the sake of buying. And getting a good deal when they do buy.
Kara,
It’s the proverbial toggle between fear and greed right now, and it seems that even the Ciscos of the world are operating more from a fear than greed mindset, which is ironic because it would seem that they are canaries in the economic coal mine.
Until they show some conviction that it is time to start thinking growth and greed, what does that tell the rest of the food chain?
Mark
Posted by Mark Sigal at February 17th, 2009 at 11:43 am–
Getting Real: On Doomsday, the Demise of So-Called Experts and the New Arbitrage
READ ME: http://bit.ly/tjd3
Even though they say the housing boom is over, there are still a lot of houses on the market here (resort town) at close to their high points. I believe the term is “capitulation” the point at which the owner of an asset realizes they had better take what they can get or ride a sinking asset to the bottom (and hopefully back up again).
Until the value of your existing investment is totally wiped out, the “taxes on the rich” AKA capital gains and other transaction costs keep many people from making a decision one way or the other. There are some houses around here I’d consider buying if they ever got back to pre-2000 prices, but they have a long way to go.
I think the value (actual not imagined) of some of these tech “bargains” might be in that same category.
Posted by Mac Beach at February 17th, 2009 at 12:35 pmMaybe they should give that money back to the shareholders and buy back stock.
Posted by Bjorn Tipling at February 18th, 2009 at 12:07 amI got an idea. If all this companies have cash, they should provide “vendor financing” at reasonable terms to their customers to procure their wares. This will provide the necessary stimulus and keep the tech spending up. Good for the vendors, good for the customers, good for the employees of both organization and good for the economy!
Posted by Naren Chawla at February 18th, 2009 at 10:07 pm