Banking, finance, and taxes

Tech Titans Still Have $269 Billion Cash For Deals (MSFT, CSCO, AAPL, GOOG, INTC, HPQ, QCOM, EMC, VMW, YHOO, DELL, ORCL, JAVA, AMZN, EBAY)

The recovery is on and mergers are happening, yet the technology sector has been slow to make deals.  Despite some deals already having taken place from the technology giants and that $260 billion cash balance which was there in the middle of last quarter is even larger now.  The tally for cash by our count is now right around $269 billion.  We looked through the top market caps of technology companies in our 24/7 Wall St. Real-Time 500 and this list is expanded now that some issues have been resolved in all the companies.  The stocks in this group are Microsoft Corporation (NASDAQ: MSFT), Cisco Systems Inc. (NASDAQ: CSCO), Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG), Intel Corp. (NASDAQ: INTC), Oracle Corp. (NASDAQ: ORCL), Sun Microsystems Inc. (NASDAQ: JAVA), Hewlett-Packard Company (NYSE: HPQ), QUALCOMM Inc. (NASDAQ: QCOM), EMC Corporation (NYSE: EMC), International Business Machines (NYSE: IBM), Dell Inc. (NASDAQ: DELL), Yahoo! Inc. (NASDAQ: YHOO), Inc. (NASDAQ: AMZN), and eBay Inc. (NASDAQ: EBAY).

These few tech companies with the $269 billion cash that could be deployed for mergers, acquisitions, or the good old dividends are also listed before tallying up credit lines, factoring, debt sales, and other creative financing methods.  We have listed the suppositions and counting methods for each one to illustrate how much is available at each company.

Microsoft Corporation (NASDAQ: MSFT) is still #2 on the Real-Time 500 with close to a $260 billion market cap as of now. It ended the quarter with $36.7 billion in cash and short-term investments, but it also ended with equity (and other) investments of $6 billion.  If you water that down by one-third, then Mister Softy is sitting on $40 billion before any new debt.  That leaves over $4.00 per share that could be paid out today if it just did another huge dividend return and wanted to start over building cash.  In any deals it makes there is always the concern that antitrust issues will arise, but that has not been the case in the search pact with Yahoo! so far.

Cisco Systems Inc. (NASDAQ: CSCO) ended its October quarter with some $35.4 billion in cash and equivalents.  It also just raised $5 billion in a senior unsecured note offering yesterday, which effectively offsets the $2.5 billion for the Starent Networks Corp. (NASDAQ: STAR) and the $3.1 billion for the Tandberg deal if that gets resolved and completed.  For counting purposes, we are not counting Tandberg because it is thought of as an at-risk deal. That puts a remaining cash balance in the pending file of about $37.9 billion today.  It spent $1.8 billion buying back stock last quarter and a recent boost to its buyback plan leaves about $13.1 billion just to buy back its own stock.  With a $136 billion market cap, Cisco could pay close to $6 billion dividend and start over building its cash if it wanted to.

Apple Inc. (NASDAQ: AAPL) is now sitting with a market cap of $181 billion now that it has a price over $200.00 per share. Buying back its own stock would be expensive and maybe just silly and integrating an outside company into Apple might be far from easy.  But Apple is now sitting on right at $34 billion in cash if you include its long-term investments.  Apple could pay out a special of over $37.00 today if it wanted to zero out the cash and start building that all over again.

Google Inc. (NASDAQ: GOOG) now has a market cap getting close to $180 billion and a new cash balance of $22 billion.  Google is spending $750 million to acquire AdMob and $105 million to acquire On2 Technologies Inc. (AMEX: ONT).  But these are both stock deals rather than cash and that leaves its cash as is.  Google has also noted it is on the prowl and these two small deals won’t stop that.  If Google could not find a way to deploy cash and chose the cash dividend route, it could pay close to $69.00 per share and just start over on its cash growth game.

Intel Corp. (NASDAQ: INTC) has a market cap of $108 billion now mid-week and has close to $13 billion in cash equivalents after closing a recent deal. But it has another $4.3+ billion in equity securities and other long-term investments. If we took the same one-third out to water that down, that leaves almost $3 billion there and a grand total of right at $16 billion.  There are dozens of core related technologies in computing and in communications that it would not fall under harsh antitrust reviews, but anything processor related to PCs would be a tough sell.

Oracle Corp. (NASDAQ: ORCL) is tough to evaluate right now because the deal for Sun Microsystems Inc. (NASDAQ: JAVA) is valued at $7.4 billion, or $5.6 billion net of Sun’s cash and debt.  But this is now a deal in jeopardy and it is hard to know if Larry Ellison will just try to walk away from it. The company has a $109 billion market cap and it ended its August quarter with some $20.5 billion in cash and marketable securities.  In short, Larry Ellison could pay out a special dividend of $4.00 if he wanted to start over at zero and build up his cash from scratch.  But Ellison is a deal-maker, and we now know just how much he is willing to spend to grow even if a target is not making money.

And what about Sun Microsystems Inc. (NASDAQ: JAVA)?  If that deal is really blocked, then this company is going to be in a pickle to find a way to make money.  The company has gone out and bought earnings before, and its old balance sheet lists close to $3 billion in cash and other equivalents.  Because it is a money-losing company, we’ll give this a 50% haircut and give the company some $1.5 billion that it could use in cash.  We’d view any company as highly unlikely to accept Sun Micro shares as buyout collateral unless they were a desperate seller.  So the total added here is $1.5 billion.

Hewlett-Packard Company (NYSE: HPQ) ended with $13.7 billion in gross cash, but that is still over $24.6 billion in cash if you include its long-term investments on the books.  That is versus a $118 billion market cap.  There is still likely to be a rather long lull before H-P tries to match its big buyout of EDS even if Dell is tip-toeing into IT-services and consulting with Perot.

QUALCOMM Inc. (NASDAQ: QCOM) now has a $74 billion market cap yet it announced last week that cash and equivalents came to $17.7 billion at the end of its fiscal fourth quarter.  QUALCOMM has been settling suits and seems like less of a legal risk than before and it would seem that the company might want to deploy its cash.  It won’t send this back of course, but that would leave the potential for a $10.00 special dividend if it wants to return capital to holders and then start over building its cash.

EMC Corporation (NYSE: EMC) has close to a $35 billion market cap and no longer has the $2.1 billion from the deal to buy Data Domain.  But EMC also still has over 50% of the float of VMware (NYSE: VMW) and that company is worth $16.6 billion that could be counted.  EMC has noted that it could be making deals into the future, and to avoid antitrust issues it would seem that the company could or would make $1 to $3 billion buyouts each year.  The company said it ended its September quarter with cash and investments of $8.4 billion.  If you assume that VMware could be carved out for half its market value in a very discounted sale, then EMC is sitting on close to $17 billion before tapping any credit lines and before tapping any debt.

International Business Machines (NYSE: IBM) has a market cap of $166 billion and now lists roughly $11.5 billion in cash.  That is down from the prior quarter after it bought back shares and retired debt. IBM would likely look at another people-intensive or service-intensive deal if it has an appetite to do a cash deal, although there are random hardware and storage and systems possibilities still out there.  Based on the debt pay down, we’d assume a deal would only come in the form of stock today.

Yahoo! Inc. (NASDAQ: YHOO) has close to a $23 billion market cap and the distant #2 search player is hard to call a definite buyer now because of new management and a reorganization.  It ended its September quarter with cash and equivalents of $4.5 billion.  It also holds over $3 billion in investments in stakes of other companies, so if you water that down by one-third it has access to $6.5 billion.

Dell Inc. (NASDAQ: DELL) completing its $3.9 billion Perot Systems Corp.acquisition, which would leave roughly $8.8 billion in cash and equivalents versus $12.7 billion reported in August.  Add in another $1 billion in cash flow for this quarter just ended on October 31 (results not out yet) and you get an implied $9.8 billion today. Inc. (NASDAQ: AMZN) is a dark horse here that is probably going to stick to using stock for its acquisitions when it can like it did with the buyout.  Its market cap is now $55 billion and it had almost $4 billion in cash and equivalents.  Raising cash would be easy for the company to do after the huge run and with as well as everyone is treating it.  That could take the cash balance far higher, although some might wonder if Jeff Bezos would use it to invest in rocket ships.

eBay Inc. (NASDAQ: EBAY) has a $30 billion market cap, yet it ended last quarter with cash and equivalents of over $4 billion when you include investments.  eBay’s recent settlement will clear the sale of the Skype unit of $1.9 billion, plus it will still retain 30% of the entity.  Include the cash flows and eBay is closer to $6 billion in the green and white paper stuff.  The company probably needs to do something for new growth, yet whether that means buying a public or private operation is an unknown.

The “cash and available” amounts we have listed do sometimes differ with what was listed as just the cash and marketable securities because of recent cash raises or because we have included a watered-down valuation of other investments that could be counted in there if a company really wanted to go do deals.  And of course no company ever wants to “zero out its cash” to pay dividends, but this shows just how much cash is available at each company.

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NOVEMBER 10, 2009

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