Microsoft is reportedly spending $41 billion to buy back their
own shares. They are also raising their dividend pay out (until
2003 they didn't even pay any dividends). Any one else think this
is a bad move on Microsoft's part?
Based on where the technology industry is going, they should be
investing the $41 billion in new ideas & products - not buying
back stock.
A company that is
losing market in search to Google, losing brand mindshare to
Apple, should be worried about losing browser/OS share to Google
(I'm thinking more Google Apps more than Chrome here), needs new
ideas - and I don't mean "Let's put Jerry Seinfeld in our ads"
ideas.
Let's be clear: Microsoft current has no problem. Windows &
Office continue to bring in money. But I think that there is a
coming problem at Microsoft. Unless there is a big secret program
that will potentially yield a myriad of revenue generators, I think
that Office and Windows are in danger of becoming obsolete. Not
today, not tomorrow - but there is a a chink in the armor that has
yet to be attacked in a focused manner by a competitor.
If it's true that there is trouble coming Microsoft, then their
behavior should be to be taking risks and innovating. Not sitting
on their heels and counting the money.
To be fair, Live Mesh is a BHAG
- but it's only 1. It's a big platform play that could win or lose
- and that's what they need: big plays. But I think that they need
more than this one, solo idea.
And if they are taking their cash and giving it back to
investors - instead of investing it in ideas and risks and gambles
that could generate revenue, I think that's a bad idea. Doing this,
suggests that Microsoft has more money than ideas. That's a
problem.
Update (Jun 25, 2010)
Fred Wilson (A VC) has posted about similar idea: cash buyback =
lack of ideas corporately:
http://www.avc.com/a_vc/2010/06/why-i-dont-like-stock-buybacks.html
And smart investors bet against those kinds of companies [those
without good ideas], managements, and boards.
So when I saw the headline this morning that RIM was doing a
buyback, I was saddened. I've been a Blackberry user since 1997 or
1998. RIM has been a great company that has driven so much
innovation in the past fifteen years that has made my life better
and the lives of many others better. I have to believe that if they
got aggressive, they could find uses for all of that cash they are
sitting on. I wish they would do that instead of buying back their
stock.
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