• ChanelS
    $HPQ write down & $MSFT write down earlier in yr demonstrate why cash on the books of tech companies should be valued at $0
    11/20/12
    Reply (9)
    • Bob de'Long: In $HPQ's case perhaps it is "goodwill" from acquistions that should be valued at $0.
      11/20/12
    • J Mintzmyer: Same for MSFT... Goodwill/intangibles not cash.
      11/26/12
    • ChanelS: the goodwill on target companies is paid for with cash from acquirers via the increased acquisition price, is it not??
      11/26/12
    • David Jackson: ChanelS, you're right: the companies are acquired using cash or stock, and either way there's a destruction of shareholder value.
      11/27/12
    • David Jackson: But they *might* have learned their lesson about bad acquisitions, in which case they won't misuse their cash going forward.
      11/27/12
    • J Mintzmyer: I generally assume takeovers are at best a defensive ploy. $ZNGA anyone? Only giants can get away with burning cash. $HPQ isn't 1 anymore.
      11/27/12
    • J Mintzmyer: Ex:: $MSFT, Skype was nowhere near worth $8B direct, but if it helps W8, Office, or WP8 sales, then it might be indirectly worth it.
      11/27/12
    • ChanelS: agreed. i just think more often than not, the cash gets spent on something that becomes worthless. the nature of the sector makes this so...
      11/27/12
    • ChanelS: thus, it may be worthwhile for a conservative investor to assume cash is worth 0, instead of looking at valuations after backing out cash
      11/27/12