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Discussing a Private Buyout of Microsoft

Zonk posted more than 7 years ago | from the that's-quite-a-deal dept.

315

PatriceVignon writes "Are private buyout companies setting their eyes on Microsoft? The Financial Times claims exactly that in an article called 'Private equity folk could do wonders with Microsoft', as ZDnet reports: 'Consider Microsoft, which has a balance sheet so inefficient that it would make a private equity investor weep ... The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure. The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions.' Business Week, though, begs to differ: 'practically speaking, it's not going to happen,' and quotes Daniel Primack: 'Snakes on a Plane will win a best picture Oscar before Microsoft gets acquired by LBO firms.' What do you think?"

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Memorable Quotes: (3, Funny)

TripMaster Monkey (862126) | more than 7 years ago | (#15981067)


"Snakes on a Plane will win a best picture Oscar before Microsoft gets acquired by LBO firms."
Daniel Primack
"I have HAD it with these muthafsckin' LBO firms tryin' to acquire my muthafsckin' company!".
Steve Ballmer
(The funny thing is, I can easily imagine him delivering this diatribe as he swings a chair menacingly...) ^_^

Re:Memorable Quotes: (1, Troll)

Shut the fuck up! (572058) | more than 7 years ago | (#15981077)

Shut up, faggot.

Re:Memorable Quotes: (1, Funny)

Anonymous Coward | more than 7 years ago | (#15981228)

You're about as funny as "User Friendly".

Re:Memorable Quotes: (2, Insightful)

Cryolithic (563545) | more than 7 years ago | (#15981476)

You've obviously never worked an internet helpdesk. User Friendly is bloody great.

The 32-bit to 64-bit Transition Is Going on NOW! (-1, Offtopic)

Anonymous Coward | more than 7 years ago | (#15981429)

At http://www.yelp.com [nicolebrazzlexxx.com] !!!

Snakes on a plane IS the best picture (nt) (-1, Offtopic)

Anonymous Coward | more than 7 years ago | (#15981079)

no text

Come on! 10X Bigger than the Biggest Ever? (5, Informative)

davevt5 (30696) | more than 7 years ago | (#15981093)

The largest LBO ever completed was RJR Nabisco in 1989 for $31.3 billion. Microsoft's market cap is $260 billion. Slap on that a 20% premium and you're looking at $312 Billion.

Do you think that an LBO of 10X the previous record is going to happen? I think not.

I like the comparison of Best Picture Oscar and Snakes on a Plane. Seriously though, I wouldn't be surprised if that film actually wins best film.

Re:Come on! 10X Bigger than the Biggest Ever? (5, Funny)

Red Flayer (890720) | more than 7 years ago | (#15981143)

I like the comparison of Best Picture Oscar and Snakes on a Plane. Seriously though, I wouldn't be surprised if that film actually wins best film.
I'd like to thank the motherf***ing Academy for this got-damn award. I'd also like to thank my motherf***ing wife, my motherf***ing agent, and the motherf***ing director.

Re:Come on! 10X Bigger than the Biggest Ever? (1, Funny)

Anonymous Coward | more than 7 years ago | (#15981264)

"Last but not least, my motherf**** dad, if it weren't for that motherf**** I wouldn't be here..." *rimshot* thank you i'll be here all week

Re:Come on! 10X Bigger than the Biggest Ever? (0)

doti (966971) | more than 7 years ago | (#15981175)

312 million? I'll take two.
No, no, three, I'll give one to my nephew.

Oh, wait, you said billion? Nevermind...

Re:Come on! 10X Bigger than the Biggest Ever? (0)

pegr (46683) | more than 7 years ago | (#15981197)

The largest LBO ever completed was RJR Nabisco in 1989 for $31.3 billion. Microsoft's market cap is $260 billion. Slap on that a 20% premium and you're looking at $312 Billion
 
But they wouldn't do it now... Microsoft's income and profits are set for a multiyear decline, what with OSS biting their heals and an upcoming OS that I predict will be met with a collective yawn. Pretty pictures make great games, but why would I want that for an OS? Especially if my hardware needs to be upgraded before I can play. No thanks!

Re:Come on! 10X Bigger than the Biggest Ever? (1)

legoburner (702695) | more than 7 years ago | (#15981401)

312 Billion? That's invade-a-country-in-the-middle-east-for-a-couple-o f-years money. Now I am concerned about microsoft invading somewhere for 2 years, as if CNN didnt give me enough to be afraid of!

On Surprises (5, Insightful)

panaceaa (205396) | more than 7 years ago | (#15981446)

I wouldn't be surprised if that film actually wins best film.

Are you a constant victim of practical jokes or something? Do people pop-out from behind corners and scream "AHHH!H#$!" five times a day? Does your girlfriend leave out pregnancy tests in the bathroom with two lines hastily drawn with a Bic pen? I'm guessing so. Dave, for your own sanity, fix your life so that if SoaP wins Best Picture it surprises you!!!

Re:Come on! 10X Bigger than the Biggest Ever? (5, Interesting)

sp3d2orbit (81173) | more than 7 years ago | (#15981454)

Exactly. Any reasonable person can see that its 100% infeasible for this to ever happen. I would think that a professional journalist for the Financial Times wouldn't be so blind, but I stand corrected. At least it will sell some subscriptions.

Google stands a better chance of a buyout than Microsoft (I'm not saying this would happen either). Google has a smaller market capitilization (around $120 billion) and has unrealized revenue in the form of "evil". Seriously, an "evil" Google would be much more profitable than an non-evil version because evil is just so lucrative. On the other hand, no has ever accussed Microsoft of not being evil enough -- I doubt there is much room for growth.

Interesting... (2, Informative)

creimer (824291) | more than 7 years ago | (#15981098)

Let the free market do what the anti-trust efforts failed to do? Interesting... except the only people who will benefit are the legal eagles. It sure as hell won't get Windows Vista out the door any sooner.

Re:Interesting... (0)

Anonymous Coward | more than 7 years ago | (#15981212)

what makes you think getting vista out the door will benefit anyone or anything?

Re:Interesting... (1)

Frymaster (171343) | more than 7 years ago | (#15981396)

It sure as hell won't get Windows Vista out the door any sooner.

and it will get the release after windows vista to you probably not at all. if a private buyout aims to increase ms's profitability by slashing its 'wasteful' r&d budget (as the article states) then you can expect a bought-out microsoft to offer less compelling products less frequently.

ultimately such a manoeveur would be a long term disaster. but, of course, if there's one thing the free market excells at, it's sacraficing long term interests for short term gains.

Re:Interesting... (2)

pixelpusher220 (529617) | more than 7 years ago | (#15981456)

you can expect a bought-out microsoft to offer less compelling products less frequently

And the difference between that scenario and now is....? How could they get any *less* productive/innovative than they already are?


SoaP (4, Funny)

just_another_sean (919159) | more than 7 years ago | (#15981101)

I think Snakes on a Plane won't win an Oscar.

Re:SoaP (-1, Troll)

Anonymous Coward | more than 7 years ago | (#15981176)

And neither will your comment.

Re:SoaP (1, Troll)

ConsumerOfMany (942944) | more than 7 years ago | (#15981222)

...said the man with no karma

Re:SoaP (1)

955301 (209856) | more than 7 years ago | (#15981295)

Retorted by the man with karma to burn.

Re:SoaP (1)

ClamIAm (926466) | more than 7 years ago | (#15981205)

I think it doesn't need to.

Re:SoaP (1)

kirun (658684) | more than 7 years ago | (#15981257)

I think it deserves one. Finally, an original idea in the endless stream of remakes and sequels!

Re:SoaP (5, Interesting)

markwalling (863035) | more than 7 years ago | (#15981348)

maybe. http://www.imdb.com/title/tt0071494/ [imdb.com]

i haven't seen either, but i googled fer de lance for the ballmer comment below, and this hit came up.

mod me down. i'm on a bad streak anyways.

Developers ! (-1, Troll)

krell (896769) | more than 7 years ago | (#15981110)

"'Snakes on a Plane will win a best picture Oscar before Microsoft gets acquired by LBO firms.' What do you think?"

Anyone would dance like Balmer if you put a dozen fer de lance's in their shorts.

I think Ballmer will win an Oscar first... (0)

Anonymous Coward | more than 7 years ago | (#15981435)

"'Snakes on a Plane will win a best picture Oscar before Microsoft gets acquired by LBO firms.' What do you think?"

Anyone would dance like Balmer if you put a dozen fer de lance's in their shorts.

I think Ballmer will win an Oscar before Microsoft is bought out.

-nosebreaker.com

In My Humble Opinion... (3, Funny)

twofidyKidd (615722) | more than 7 years ago | (#15981112)

I think...

"...tak[ing] the axe to Microsoft..."

is a good start.

Re:In My Humble Opinion... (4, Funny)

darthtrevino (812116) | more than 7 years ago | (#15981460)

From my parents basement in Wyoming, I stab at thee..

Utterly Absurd (0)

Anonymous Coward | more than 7 years ago | (#15981114)

This is one of the more silly bits of speculation I've seen in a while.

The Phantom console will come out and be a success before this happens.

Re:Utterly Absurd (2, Funny)

shawb (16347) | more than 7 years ago | (#15981369)

I'll see your Phantom and raise you one Duke Nukem Forever... shipping on said Phantom.

Snakes on a Plane will win a best picture Oscar (5, Insightful)

Anonymous Coward | more than 7 years ago | (#15981115)

If Titanic can get one, anything is possible.

And then... (4, Insightful)

The MAZZTer (911996) | more than 7 years ago | (#15981117)

"The new management could take the axe [sic] to Microsoft's $6.6bn of wasteful research and development expenditure."

And then Apple will produce wondrous innovations, and replace Microsoft as the leading OS supplier, and Microsoft will go under and LBO will write it off as Microsoft's fault somehow.

Re:And then... (3, Insightful)

Rix (54095) | more than 7 years ago | (#15981247)

Apple could do that *now*, if they'd sell MacOS for commodity systems.

Re:And then... (4, Insightful)

99BottlesOfBeerInMyF (813746) | more than 7 years ago | (#15981315)

Apple could do that *now*, if they'd sell MacOS for commodity systems.

You're both wrong. MS's monopoly is not dependent upon the quality of their OS compared to other vendors as much as it is upon lock-in and market position. Apple can't compete outside its vertical monopoly unless they can get OEMs to pre-install. OEMs won't pre-install because MS will kill their entire Windows business with discriminatory pricing and that means they're betting the company on the single, unlikely possibility that all the lock-in strategies MS has built into Windows won't work. At the same time Apple is betting their company on the same since they are then decapitating their hardware business and most of their profits.

In short, for both Apple and at least two other, major companies to all take such a huge risk is highly unlikely and could very well get whoever made such a risky decision sued to oblivion.

Re:And then... (2, Insightful)

BalkanBoy (201243) | more than 7 years ago | (#15981350)

somehow i dont see that happening either. introducing a thousand new drivers for all commodity hardware out there into OSX is probably going to make OSX suck just as hard as Windows (or at least, increase the likelyhood of destabilizing OSX by orders of magnitude). What does OSX support nowadays - only a few video cards, chipset never changes, and some other hardware that apple makes - nothing else gets plugged in unless it's 'apple-blessed'.... makes apple's job a lot easier, wouldnt you say?

Re:And then... (1)

frosty_tsm (933163) | more than 7 years ago | (#15981317)

If they focused on what they did best from a financial standpoint (operating systems, development & business software software) and ignored what they bundle for free (IE, MediaPlayer) or what is loosing them lots of money (Xbox; still hasn't turned a profit, though it might) they would be saving millions annually in R&D costs that they aren't getting much return for.

MS is an OS and Business software company. They aren't satisfied with that and keep trying to expand and compete where they are the underdog.

Re:And then... (2, Insightful)

shawb (16347) | more than 7 years ago | (#15981412)

While the Xbox may on paper be a loss for console sales, I doubt that really includes liscensing fees, etc. Add on to that the Xbox being just another way to try to integrate the Microsoft Experience (I.E. lock-in at the home consumer level) and you can see why MS doesn't mind losing a few dozens of dollars per console sale.

Re:And then... (4, Insightful)

Coryoth (254751) | more than 7 years ago | (#15981342)

Microsoft research is a little wasteful, at least in as much as the amount being spent doesn't compare very well to shipped product improvements. The problem, as far as I can see as a complete outsider, seems less to do with MS Research not doing a lot of interesting work (just have a look at some of the people working there, and some of the research papers they put out), and more to do with the gap between MS Research and shipping products. I have no idea if its a communication thing, a management thing, or what, but the end result is that a lot of great research work seems to struggle to find its way into products. It seems that's the real difference between MS and Google or Apple in terms of innovation. MS has the ideas, but sometimes I wonder if there's anyone in the "product development" side actually listening.

Re:And then... (4, Interesting)

Vicissidude (878310) | more than 7 years ago | (#15981482)

Having worked at Microsoft, mostly because I desperately needed the money rather than actually wanting to work there, I can honestly say they do have some cool stuff used internally which they SHOULD push out to the general public.

Some of the best are their test automation tools which made it a breeze to do work there. With a push of a single button, I could automagically reinstall Windows on 100 machines simultaneously, have it automatically start different automated tests on each machine, upload the results to a central server, and have those results parsed for any problem that came up in the tests.

Of course, the public will never see tools anywhere near like that. Even if they could make it so that Windows wouldn't be pirated, their management is so dense and top-heavy that they can't manage their way out of a paper bag. Mini-microsoft is right, they should thin out their management.

Re:And then... (5, Insightful)

dslauson (914147) | more than 7 years ago | (#15981408)

Seriously. I can't stand people who call having a big R&D budget wasteful. There are a lot of things I don't like about Microsoft, but spending money on Research and Development isn't one of them. I'd rather see them spending money there than just lining the pockets of investors.

but of course! (2, Insightful)

MarcoAtWork (28889) | more than 7 years ago | (#15981119)

The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure. The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would


why not just fire everybody (including the R&D department) and, why stop there, why not also sell all the buildings, liquidate all the infrastructure, think of the additional savings! think of just how much cash flow you could get with 0 expenses in your P&L statement!

Re:but of course! (2, Funny)

Red Flayer (890720) | more than 7 years ago | (#15981192)

Dear Marco,

Thank you for your timely suggestion regarding the future fate of Microsoft. Based on your idea, we have calculated that maximal profits over the next 10-year period can be achieved by doing exactly as you suggest.

And of course, even that is considered long-term planning in today's corporate world.

Sincerely, Preston Winfield
CEO, AAA LBO Company #2

private equity not long-term (5, Insightful)

nicolaiplum (169077) | more than 7 years ago | (#15981124)

Microsoft's R&D spending might make a private equity investor weep, but private equity investors are around to buy distressed or underperforming companies, make them lucrative, and sell them. They don't care about long-term R&D or having a product pipeline further out than when they cash in their investment by selling the company.
Of course you could starve and loot Microsoft and make a lot of money, but only if your plan is to dispose of the carcase before it begins to rot.

Re:private equity not long-term (0)

Anonymous Coward | more than 7 years ago | (#15981288)

The carcase is not an issue. The latest trend in these buyouts is to do a little house cleaning. Have the company borrow as much money as it can and use that money to pay a dividend to the LBO firms, and then take the company public again reaping even bigger rewards. So effectively they get the public to pay them to dispose of the carcase.

Microsoft isn't a typical target. (0)

Anonymous Coward | more than 7 years ago | (#15981466)

If you valued Microsoft by its physical assets, its stock would be over-valued by orders of magnitude. Its value consists of non-tangeable assets. Trying to extract the value from those assets would likely make them dry up and blow away. For instance, if a raider were to lay off the R&D staff, the customers would see the writing on the wall and flee to FOSS as fast as they could. The revenue stream would cease to flow overnight.

http://en.wikipedia.org/wiki/Corporate_raid [wikipedia.org]

It could happen... I don't think so though (1)

BlahMatt (931052) | more than 7 years ago | (#15981136)

It could happen... I don't think it's likely but it could happen. If it were to happen it would cause a huge stir in the marketplace, a lot of people would lose their jobs and the first 6 months would be crucial. To me, the people losing their jobs part just sucks, I know what it's like to be acquired then being told that X percent of the work force is gone. It's unpleasant. However, as long as all the changes were handled quickly and efficiently the stir that would be created, spun correctly, could be a huge profit maker for microsoft and, depending on the direction the company goes, could be a huge win for consumers as well. Again, I highly doubt any of this is going to happen. So that was useless to read. Oh well, my two cents :P .

the solution (1, Interesting)

rice_burners_suck (243660) | more than 7 years ago | (#15981138)

All the software companies in the world, and the FOSS communities, should buy Microsoft, free all its IP under a FOSS license, and dissolve the company. This will at last allow real innovation to take place in the industry.

Re:the solution (0)

Anonymous Coward | more than 7 years ago | (#15981198)

I think RMS just had "a happy ending" reading that.

well... (1)

hkgroove (791170) | more than 7 years ago | (#15981145)

IF it was going to happen would it shake up the industry? Which is such an obvious question I don't know why I'm bothering to ask that.

Would it lead to a huge push to opensource initiatives or would we see the baby bell effect and potentially have new operating systems from which to choose?

Would slashing Microsoft's workforce degrade the quality (hurrr!) of their systems or would it allow them to perhaps, for once, engage the standards for say IE8?

Again, this is all just random guessing - but those were the two things that first came to mind.

Umm, okay... (4, Insightful)

Tim_sama (993132) | more than 7 years ago | (#15981147)

"...to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions."

Yes, because the highest aspiration of any company is to BORROW lots of money, not to, I don't know, turn a profit. Seriously, what are these people smoking?

Re:Umm, okay... (1)

NeutronCowboy (896098) | more than 7 years ago | (#15981354)

What's more - MS already has $30 billion in cash in the bank. They don't need to borrow mega-billions, because they already have them. Besides, what the hell would MS do with the Mega-billions? Buy Apple? Oracle? The US government? This article is trash - though it does give an interesting insight into why companies are bought and sold: short-term profit.

Re:Umm, okay... (0)

Anonymous Coward | more than 7 years ago | (#15981367)

"Yes, because the highest aspiration of any company is to BORROW lots of money,"

Yet this is the central tenet of the old "house is an investment" meme.

Re:Umm, okay... (1, Insightful)

Anonymous Coward | more than 7 years ago | (#15981424)

That's how they work.

1. Buy company
2. borrow tons of money
3. now they have huge cash flow
4. sell stock at 10x what they bought the company for
5. ??????
6. PROFIT!!! ...back in step 4.

They tried to do a LBO of Disney in the early '80s when Reagan pushed through the cut in the Capital Gains Tax, which is actually a tax on this sort of shenannigans. The LBO company was going to sell off its real estate and other properties!

Other folks weren't so lucky after that tax cut; many, many people lost their jobs. At Disney, we all had our hours cut.

There is little more evil than a LBO. Even Microsoft isn't as evil.

Hey, maybe somebody could buy out Sony? (yeah, I'm a victim of their rootkit)

Wha? (5, Insightful)

The Angry Mick (632931) | more than 7 years ago | (#15981160)

The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions

Some private equity firm thinks Microsoft, one of the richest companies in the world, would be better off borrowing money?!? I thought capitalism was about maximizing profit. When did things change?

I guess I really need to brush up on my economics . . .

Re:Wha? (2, Insightful)

TubeSteak (669689) | more than 7 years ago | (#15981245)

My thoughts exactly.

If they cut R&D spending, what are they going to use all that borrowed cash for?
Buyouts of smaller companys?

Microsoft already has ~$35 billion floating around that they could spend on buying up other software outfits.

The only people who would benefit from this are the guys making the buyout. They cut MS to the bone, sell off assets, borrow money, issue dividends, then sell the stock before it can tank. After that, what do they care? They already got their dividend & sold off the stock at some inflated price.

Re:Wha? (1)

Jtheletter (686279) | more than 7 years ago | (#15981308)

The only people who would benefit from this are the guys making the buyout.

Mod parent up.
I think you hit the nail on the head with this one. These guys aren't looking to turn MS' financials around because they want to see it become some better company, they want to take those slashed salaries as profits for themselves. If doing this to an $X billion company nets them $Y billion in profit, then doing this to MS at 10X valuation should net them 10Y. And with all the cited bloat there's likely lots of places to wring even more profit out of it. Capitalists do not perform multi-hundred-billion dollar buyouts in the name of corporate philanthropy.

Count me in! (3, Insightful)

MarkusQ (450076) | more than 7 years ago | (#15981422)

The only people who would benefit from this are the guys making the buyout. They cut MS to the bone, sell off assets, borrow money, issue dividends, then sell the stock before it can tank. After that, what do they care? They already got their dividend & sold off the stock at some inflated price.

I'm sold. Put me down for $200 worth, and let me get back to you on Monday after I check to see how much more I can kick in.

--MarkusQ

P.S. And, unlike the hypothetical pure-greed investors others were talking about, I'm also doing this for the good of humanity. So I expect a proportionately larger cut when we liquidate Microsoft (God, I love the sound of that)

Re:Wha? (1)

chill (34294) | more than 7 years ago | (#15981301)

Some private equity firm thinks Microsoft, one of the richest companies in the world, would be better off borrowing money?!? I thought capitalism was about maximizing profit. When did things change?

Never, it has always been this way. The idea is if you can borrow money at x%, and invest your money and get >x% return, then by all means borrow and invest yours! You come out ahead of the game.

As the richest company in the world, they most likely have an excellent credit rating and can borrow cheaply. And, IIRC, their investment division is one of the most profitable.

It IS about maximizing profit. (5, Interesting)

Tracer_Bullet82 (766262) | more than 7 years ago | (#15981343)

To the buyout firms that is.

What happens in a Leveraged Buy Out is the firm/s would loan money from the bank, making the FUTURE possesion as collateral. Thus the debt will be sadled by the target firm. Meanwhile the raiders/vultures as they usually called(especially KKR) will strip the company, sell it's asset and then sell the firm. Pocketing profits, while the firm itself pocket the debts, not them. These of course has destroyed companies and unnnecessary slashing jobs.

Lately, their newest tactics is they will loan even more money from banks.. to PAY THEMSELVES as FEES for buying the firm. Pocketing up t hundreds of millions. Guess who's taking the debt..And it's all completely LEGAL.

There's been some rumbling within the EU Adminitration about well reviewing the law. So far its up to nought.

While the EU politician aren't in the pocket of businessman/ corporations unlike "some" paragon of "freedom" and "fair play", it is encredibly beraucratic.

There's 8% free float of MSFT in the market.. which the buyout firms can easily buy. 52% in instituition, this is harder to buy but still institutional managers are'nt going to say no to 15% or 20% premiums. Thats quite enough to override the minority shareholder.

Lest you think 300 billion plus is a big number, the trends these days are for buyout firms to gang together. And getting the money wouldn't be hard.

That said though I'll doubt there's going to be a buyout. (Purely my assumption) Gates and Co certainly will have Class B shares. Class B shares are shares that have higher voting previlege/power than normal shares. E'g GOOG class B shares have 10 times voting power than Class A/normal shares.

Re:Wha? (2, Insightful)

99BottlesOfBeerInMyF (813746) | more than 7 years ago | (#15981344)

Some private equity firm thinks Microsoft, one of the richest companies in the world, would be better off borrowing money?!?

No, some private equity firm thinks the private equity firm would be better off using MS to borrow money, while gutting the long-term investments in order to inflate the stock, before said firm bailed on MS, leaving MS in rough shape and the private equity firm swimming in money. You've made the mistake of thinking investors and executives are acting in the best interests of the company, instead of in their own best interests. This hasn't been the case in American business in a long time.

Re:Wha? (1)

xenocide2 (231786) | more than 7 years ago | (#15981356)

Well, there's a couple of motivations behind that. First is the leveraged buyout, which was made rather popular in the 1980s before it degenerated into what's known as the "junk bond" scandal. Basically, you buy a company out, using the company you just bought as colateral. The financing behind it is much more complicated, but that's close to what it is underneath. Given the context of the situation (LBOs), this is mostly what they're referring to.

The other idea is that companies are supposed to seek above market returns. As long as the return their loan was spent on pays out better than the terms of the loan, it shouldn't not be an option. The problem is, as you've described, Microsoft is already making more cash than above market return ideas. The huge lump sum dividend is proof enough that they had no better place to invest it. And once you slash their R&D efforts and their practice of hiring good programmers just to keep them away from potential competitors, you'll have even more cash that you can't spend fast enough. Which may be what you meant when you said that the richest [public] company in the world needs to borrow. However, if part of the buyout means putting in new management with a much more aggressive set of ideas to pursue it might make sense. Primarily that would mean a lot more mergers and acquisitions, which is a really bad idea for a company that's already been subject to anticompetitive sanctions and still maintains a near monopoly.

Re:Wha? (1)

ClamIAm (926466) | more than 7 years ago | (#15981363)

I thought capitalism was about maximizing profit.

I would venture to say that buyouts definitely maximize profits. However, it's more likely for those doing the buyout than anyone else.

not you (3, Insightful)

Quadraginta (902985) | more than 7 years ago | (#15981377)

No, generally speaking it's the silly geese at the Financial Times who do. Or not. This is probably just one of those outrageous speculations that journalists do to provoke outraged responses and boost circulation. Not unlike...uh...never mind.

But the proposition that a rich company would be better off in a borrowing state is not without merit. People forget companies are not people, and the same intuitive "rules" about sensible financial decisions do not apply. It's good as a person to have a lot of cash in the bank. Makes you secure. Not so for a company. A company is not an end-user of wealth, the way people are, but merely an engine for transferring wealth from one group of people (the customers) to another (the employees, investors, and subcontractors) [Value flows the other way, of course, but we're talking cash money here.] The goal is to do so as efficiently as possible. Money received from customers should be "invested" as soon as possible, i.e. transferred to new hires, new capital equipment, et cetera. It's doing nothing useful sitting in the bank. The only money a company should keep lying around is a small cushion for unexpected fluctuations in the market, the price of resources, et cetera.

But why borrow? The reason is that you don't have to wait until you've accumulated enough cash from present operations to invest in the capital expansion necessary to undertake future, more profitable operations. You borrow the money immediately, then start the new more profitable operations immediately, and pay back the loan. Presumably the fact that you start earning bigger money earlier pays for the cost of the loan. Everybody wins.

It's not the same as an individual borrowing money to buy a car, which is more nearly pure consumerism. It's more like borrowing money to go to college. It's much more sensible to borrow the money and go to college at 18, graduate, then pay the loans back over 5 years with a high-paying college-graduate job, than it is to work for 15 years at a low-paying menial job, save up, and finally go to college at age 33.

Kill the damn capitalists (2, Interesting)

ant-1 (120272) | more than 7 years ago | (#15981161)

Cut the workforce ? Cut the R&D ? Make billions more ? Why do the black suits only want more money ? Humans can't eat it, dammit !

Please let my shiny Microsoft live like that, with their beautiful innovations, solid products and work schedules respectful of the family. *grin*

Hate to Microsoft? (1)

Drakin020 (980931) | more than 7 years ago | (#15981199)

I think alot of that artical was just writin by someone who thinks Microsoft doesnt know what they are doing.

The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure
Wastful? Ok someone who doenst like Microsoft could easly say wasteful, I myself think they are doing a greatjob of deploying business and enterprise solutions such as CRM Sharepoint Portal server Office communicator and so on. I dont see this as a waste

The bloated workforce of more than 60,000
Bloated? Hello have you seen how huge this company is? I dont see this as being bloated I personally like that a company I depend on has a large staff at work. Sorry this artical says crap to me.

Re:Hate to Microsoft? (1)

jaymzter (452402) | more than 7 years ago | (#15981284)

I swear I am not a grammar Nazi, but somewhere in your home country a High School English teacher just spontaneously burst into flames.

Wouldn't that end Microsoft? (1)

cnelzie (451984) | more than 7 years ago | (#15981200)

...and leave a massive vacuum?

    What the hell would happen to all the PCs out there and users that are so reliant on MS Products that even thinking of switching causes people to break out in hives?

Re:Wouldn't that end Microsoft? (1)

MindStalker (22827) | more than 7 years ago | (#15981277)

Believe it or not the current versions of all the Microsoft products work just fine now. Someone could buy the rights to the office suite and someone else could buy the OS. Sure theyd probably charge you for updates, but it wouldn't "destroy the PC industry as well know it"

Microsoft, no... US Govenment yes (0, Offtopic)

smbarbour (893880) | more than 7 years ago | (#15981201)

I would much rather see the LBO firms tackle the wasteful spending of the US Government. Microsoft's software might be crap, but the research division of Microsoft is well worth the money spent.

Just because the US is the ONLY military superpower currently in existence, doesn't mean that it should be the "world police" force. We should be spending the defense budget on the defense of our country, not on forcefully installing puppet governments in previously sovereign nations. Every country deserves the right to rule itself. It would be a different story if the US was asked to defend a sovereign nation (as was done with Kuwait in "Desert Shield/Storm")

But I'm going off into a rant...

Re:Microsoft, no... US Govenment yes (1)

truthsearch (249536) | more than 7 years ago | (#15981310)

the research division of Microsoft is well worth the money spent.

Like the pennyblack project which spent millions trying to figure out how Microsoft could charge you money for every email you spend? Or the many software patents? Or all of those usability studies which they tell developers to follow yet ignore themselves? Please tell us of all the wonderful contributions which the $6 billion R&D department has made to the world, or even just to Microsoft.

Re:Microsoft, no... US Govenment yes (1)

legoburner (702695) | more than 7 years ago | (#15981423)

WinFS .. no wait... Vista... hmmm no... ahhh Microsoft Bob!

Wasteful?!? (1)

common middle name (657525) | more than 7 years ago | (#15981207)

"The new management could take the axe to Microsoft's $6.6bn of wasteful research and development expenditure"

It's funny how some people see any R&D that doesn't result in a product release as "wasteful." How do these people expect technological progress to happen?

Is This a Joke? (5, Insightful)

susano_otter (123650) | more than 7 years ago | (#15981209)

How does cutting R&D and the workforce = good business plan?

And why would Microsoft need to borrow "megabillions" anyway, let alone at the cost of their workforce and R&D?

Re:Is This a Joke? (2, Interesting)

kirun (658684) | more than 7 years ago | (#15981303)

How does cutting R&D and the workforce = good business plan?

The plan would be to bleed them dry for a few years, pocket the cash, and by the time the no R&D's caught up with them, they've stripped and sold the carcass and moved on. This happening to Microsoft sounds too good to be true, really.

Re:Is This a Joke? (1)

Otter (3800) | more than 7 years ago | (#15981372)

Is This a Joke?

It's lost on everyone, including the ZD columnist, but -- yes, the original FT piece is supposed to be tongue in cheek. (At a minimum, it explains to what use the borrowed money would be put, for the benefit of everyone throwing up their hands and asking "Why would they need to borrow money? If only there were some sort of linked article that explained it!")

SoaOS? (1)

Gilmoure (18428) | more than 7 years ago | (#15981211)

Someone wants to MS to borrow money, fire everyone, and put snakes in the OS? /didn't read TFA, didn't read TFSynopsis

Stock repurchase (2, Interesting)

Johnny Mnemonic (176043) | more than 7 years ago | (#15981234)

Is Microsoft defending against this notion through it's stock buy back plan? I would presume that would give more voting shares to the current Board of Directors, who could then vote against new management; but perhaps that is an oversimplification.

What other reasons does MS have to repurchase it's stock? I don't understand the benefit that this gives to a company.

Do they feel that their stock is undervalued now, so by repurchasing it they can sell it later at a better price, and thereby acquire more financial resources?

Re:Stock repurchase (0)

Anonymous Coward | more than 7 years ago | (#15981311)

If there is less supply of stock on the market it is likely to be worth more (assuming demand keeps up). If it's worth more then all the execs' stock options will go up. It's all about lining pockets and probably very little to do with a business plan.

Slashdot and business week have Jumped the Shark (1, Informative)

His name cannot be s (16831) | more than 7 years ago | (#15981248)

WHAT THE FUCK?!

This is the absolute, most absurd stupid motherfucking idea I've ever heard in the universe.

Businessweek has now kicked the bucket,

and someone at slashdot should be cockpunched for even linking to it (which is only being done because it's MS)

Pa-fucking-thetic

Re:Slashdot and business week have Jumped the Shar (1)

truthsearch (249536) | more than 7 years ago | (#15981430)

So are you saying you're sick of all these mothafuckin' articles on these mothafuckin' sites?

(Sorry.)

Step 4: ??? (1)

Deathbane27 (884594) | more than 7 years ago | (#15981253)

The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions.

Step 1: Buy Microsoft
Step 2: Kill R&D and lay just about everyone off.
Step 3: Borrow mega-billions
Step 4: ??? - What the crap do you do with all this money after getting rid of everything that could possibly use it?
Step 5: Profit!

Re:Step 4: ??? (1)

jandrese (485) | more than 7 years ago | (#15981302)

Step 4 is obvious: Line the pockets of the buyout guys.

It's pretty weird to think about Microsoft as a Pump and Dump stock though.

Honestly, is /. getting this desperate for topics. (2, Insightful)

Super Dave Osbourne (688888) | more than 7 years ago | (#15981256)

And monkeys are going to fly out of my butt before M$haft gets purchased by any private equity leverage firms. I find it sad that /. has become so desperate for articles they will even let a topic like this make believe hit on a Dry News Friday (tm). Have a nice weekend, with or without /.

Re:Honestly, is /. getting this desperate for topi (1)

Jason Earl (1894) | more than 7 years ago | (#15981431)

This is the sort of thing that happens when institutional investors start to become "unhappy" with a company's management. Microsoft is sitting on a pile of money that's not getting very good returns. Heck, you could put Microsoft's cash pile in an index fund and do better. About the only thing that's keeping the route from being more general is the hope that new versions of MS Office and Windows will improve profitability dramatically. If this doesn't happen (and new versions of MS Office and Windows have lots of competition from perfectly usable old versions of MS Office and Windows), then investors are going to want Microsoft to move in a radically different direction.

"Wasteful" (5, Interesting)

TheNumberless (650099) | more than 7 years ago | (#15981258)

That $6.6 billion of "wasteful" R&D is one of the few things I like about Microsoft. Long-term research without a guarantee of short-term returns is a good thing, and Microsoft is one of the only companies that does it anymore.

Think about all the advancements that came out of Bell Labs, before it had a need to be more "efficient".

Re:"Wasteful" (1)

rlp (11898) | more than 7 years ago | (#15981361)

hink about all the advancements that came out of Bell Labs, before it had a need to be more "efficient". Hmmm, very similar to what Lucent actually did with Bell Labs. But, it helped to make Lucent the company it is today. Oh, wait ...

Not that big of a dilemna (1)

R2.0 (532027) | more than 7 years ago | (#15981259)

As much as I'd like to see Microsoft cease to exist, having the company gutted and run into the ground after an LBO is a cure FAR worse than the disease.

First, they flat out pocket the cash reserves.

Second, they borrow huge amounts of money against MS capital - and pocket that.

Third, sell off parts of MS. Pocket that.

Fourth, declare bankruptcy. Retire to Bahamas.

R & D is waste? (1)

scythe000 (564836) | more than 7 years ago | (#15981270)

'6.6bn in wasteful R&D'

Excuse me? Since when has research and development been considered wasteful, and needs to be slashed? I imagine that most companies are surprised MS does any research at all, but R&D is exactly what needs to be kicked up a notch at Microsoft.

Never going to happen (2, Insightful)

Dracos (107777) | more than 7 years ago | (#15981294)

Aside from the insane value of the buyout (as previously commented), the simple fact remains that MS' management is too egotistical to allow this to happen. If anyone did put forth any effort on a buyout, the MS spin machinery would immediately set its sights on their own shareholders to dissuade them.

Ofcourse its going to happen; diversity! (0)

Anonymous Coward | more than 7 years ago | (#15981297)

Diversity is the name of the game here. Any company knows that investing in Microsoft is well like investing in the future and since you can combine several expertises into one company its an ideal idea. Not only do you get a nice IT branche company but I'm pretty sure that you'll get the furniture branch to show some very serious interest as well here. Or do you know a better way to "crash test" your chairs then to try if they'll survive one month in Ballmers office?

Forward Into the Past (4, Insightful)

ewhac (5844) | more than 7 years ago | (#15981306)

Don't you remember? Michael Milken went to prison. Your "junk bonds" and leveraged buy-outs were disasterous for American industry and productivity.

The 1980's are over, and good riddance. Get over it.

Schwab

absurd (2, Insightful)

deuterium (96874) | more than 7 years ago | (#15981309)

It seems like every time some hack reporter or "inside" blogger comes up with stuff like this, it ends up on Slashdot. It's not news, it's speculation, and dodgy speculation. It reminds me of other invented news, like groundless top ten lists [futureguru.com] or supposedly new trends [businessweek.com] . Nothing more than one person's interpretation of a mixed bag of news and opinions. Real news is something like this [bbc.co.uk] . An event or fact of some sort is related. It's discrete. Stories such as this Microsoft takeover are simply conjecture. There's certainly a place for conjecture, and some is more informed than others. Rumors about the AMD/ATi deal were correct, and were also more plausible. That the Microsoft post itself acknowledges how entirely unlikely it is, I have to wonder... why then was it passed on?

This idea came up for "define:preposterous" (1)

Control Group (105494) | more than 7 years ago | (#15981336)

That's one of the stupider ideas I've ever read.

So the plan is to kill the part of MS that's doing the best work, their R&D people?

This would take shortsightedness to heights dreamed of only by teenage boys ten seconds away from orgasm.

(Not to mention that the amount of capital required to even begin to entertain the thought that there might be a chance of MS tanking hard enough in the near future to make this possible is so high the only organizations that could afford it wouldn't care to.)

You mean... (1)

partenon (749418) | more than 7 years ago | (#15981339)

... a Microsoft that thinks even more about money than current one? No, thanks.

Natch (1)

RyoShin (610051) | more than 7 years ago | (#15981357)

The bloated workforce of more than 60,000 could be slashed, to the point where the huge resulting increase in cash flow would at last permit the company to borrow mega-billions
If a company can make a profit of a billion a year, yet still be able to afford all of that "bloat", then why cut the costs?

Why have 10,000 people lose their job just so that some investor's porfolio can go up a quarter of a percent? (veiled Office Space reference)

It's a wonder I'm not more cynical.

Bush isn't the reason for unemployment (well, not the full reason), it's people with these kinds of ideas. "We make a lot of money. Let's fire a bunch of people and ruin some lives so we can make even more money!"

tmod up (-1, Redundant)

Anonymous Coward | more than 7 years ago | (#15981389)

hobbyist dilettan7e Declined in market from within. distribution make yes, I work for create, manufacture it simple,

Analysts are not Warren Buffet (0)

Anonymous Coward | more than 7 years ago | (#15981406)

Unless a career counsler is paid 6 figuers, works 30 hours a week and gets 2 months vacation, why would you take career advice from them? Taking career advice from from someone that has to work hard is like taking stock advice from someone who hasn't made a fortune from investing themselves. If they were really good at it they would be making millions from investments like Warren Buffet does, instead of getting paid to tell others what to do.

Required Reading (1)

ewhac (5844) | more than 7 years ago | (#15981427)

To get a good idea of what junk bonds and leveraged buy-outs are all about, and the effects they can have, go to your library and check out a copy of Storming the Magic Kingdom [biblio.com] , by John Taylor, which details the attempted LBO of the Walt Disney Company in the early 1980's. An absolutely riveting and illuminating story into the excesses of "corporate raiders" of the time and how Disney managed, just barely, to fight them off.

Schwab

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