When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Saturday, January 12, 2013

Microsoft sweating the assets?

Recent article (excerpt below) caught my eye--

Is Microsoft Now A Value Trap? So Says Barry Ritholtz - Forbes: "“sweating the assets” - " . . . The Windows, Office near monopolies are hugely cash and profit generative. So are the various back office products for large corporates. Bing loses a shedload, as do most to all of the various things Microsoft has tried to build by spending those Windows/Office profits. I wouldn’t want to have to prove this with a spread sheet but it is at least arguable that the shareholders would have made more money if instead of spending the profits on things that may or may not work (and usually don’t), those profits were just returned to the shareholders.And it’s a stronger argument from here into the future. Yes, Windows Phone might be a success, so might Surface. But there’s still many tens of billions of profits to be wrung from those two desktop near monopolies. Microsoft could sell all of the peripheral businesses and commit to simply upgrading those two pieces of software (and perhaps the enterprise stuff) into the future until they are entirely finished in the marketplace. It’s known as “sweating the assets” and as I say, it is at least arguable that this would produce the maximal return to investors. Which is the point of the whole game anyway. Just stop looking for new things to do and just gouge as much profit as possible out of the decline over the decades of those two hit products."

I'm, not sure it's a strategy that would work. My best guess--Windows and Office will be gone as "cash cows" a lot quicker that the author of the above article thinks--that's why Redmond is in such a panic and gushing cash on so many failures--including its latest--Windows 8.


The Big Picture

Financial Crisis - The Telegraph

JohnTheCrowd.com | The Sailing Website

Craig Newmark - craigconnects