Microsoft CFO: Microsoft May Borrow To Finance The Deal!

Feb 5, 2008 | 3,356 views | by Navneet Kaushal
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If history is taken into account then Microsoft has been known to have a huge reservoir of funds which prevent it from loaning for any deal, but this time it appears that the bid of US $44.6 Billion has forced it to consider such an option. This was made known by the company's CFO Chris Liddell in a briefing to Wall Street analysts.

microsoft Microsoft CFO: Microsoft May Borrow To Finance The Deal!

This would be the first time in the company's history that the cash part of the half-cash, half-stock offer at $31 per share would be fulfilled through a borrowing.

The company had $21 billion in cash and short-term investments as of Dec. 31. The company is considered cash rich and it probably doesn't need to beg for the money. "If you look at the cash component rather than focus on the stock component, that's going to be over $20 billion worth of cash,…We could fund most of that through our cash holdings, but it's likely we're actually going to borrow for the first time," said Liddell. Moreover, he said that the finance would entail a mixture of the cash the company has in addition to the debt.

Further, that Microsoft is considering loan underscores the magnanimity of the bid and that the company is even willing to take that risk. It seems to have good reasons to take the risk as it has been reporting over US$5.8 billion in net cash from operations in the previous quarter itself. But, the question exactly how much debt Microsoft is eying on is anyone's guess.

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Navneet Kaushal

Navneet Kaushal is the founder and CEO of PageTraffic, an SEO Agency in India with offices in Chicago, Mumbai and London. A leading search strategist, Navneet helps clients maintain an edge in search engines and the online media. Navneet's expertise has established PageTraffic as one of the most awarded and successful search marketing agencies.
4.thumbnail Microsoft CFO: Microsoft May Borrow To Finance The Deal!
4.thumbnail Microsoft CFO: Microsoft May Borrow To Finance The Deal!