As the Skype deal has yet to become finalized, Microsoft spent a mere 75 million dollars in fiscal 2011 (just finished) on acquisitions.
That works out to roughly 0.14% of the company’s massive $52 billion cash and short-term investments stash. The company is one of many technology giants sitting on a mountain of cash, with seemingly little use for it. Unlike many of its technology brethren, Microsoft does however pay a dividend.
Of course, the $8.5 billion dollar purchase of Skype, if and when it goes through, will make fiscal 2012 a very active year in dollar terms for Microsoft-led acquisitions. In fiscal 2010 the company spent $267 million on acquisitions, and $925 million in fiscal 2009.
In fiscal 2008, Microsoft dropped a cool $6 billion to buy aQuantive, its largest purchase before the proposed Skype deal. After the Skype purchase, the company will be left with a 43.5 billion dollar cash hoard, a full 18.7% of its total market value. In other words, after the Skype deal, Microsoft’s market valuation minus its cash would be 188 billion (at its current stock price). That would give the company a PE ratio of just over 8, discounting all cash and using fiscal year 2011 profits as the meter stick.
For a final comparison, the purchase of Skype represents just 16.3% of Microsoft’s current cash position.
What do all those numbers mean? That Microsoft is not in the mood for purchasing small companies at large premiums to their market value, but is instead buying large, one-off companies and integrating them with their homegrown offerings. Not only that, but the market seems to not take too high a view of the strategy, given the low multiples that the firm is trading at.
Perhaps Microsoft is content to let Google and Facebook fight the talent wars alone.