Here is an article from The Big Money.
“That’s not the frame of this insightful Wall Street Journal story, but it could be. Journal reporter Ben Worthen flags the widening gap between cash-rich tech companies—Cisco (CSCO), Microsoft (MSFT), Apple (AAPL), Google (GOOG), and Oracle (ORCL)—and everybody else. By keeping tens of billions of cash on their balance sheets, Worthen writes, “these companies can afford to take risks that smaller companies can’t at a time when the economy remains fragile.”
This notion is so far outside of conventional wisdom that it can’t even get in the same room. For decades we’ve been told that the nimble startup would run circles around the corporate dinosaur. But Worthen’s piece is a great reminder that a crucial way for companies to obtain and maintain their advantage in rapidly developing fields is through acquisition. And in order to make the right acquisitions, you need currency (cash is best, but stock is also a valid currency under the right conditions).
This issue is too often ignored in discussions of a Facebook IPO, which the company’s investors have publicly ruled out for 2010. There is a line of thinking that says that Facebook is already flush with cash, and since it is now cash-flow positive, it ought to be able to stay that way. Other tech startups, too, argue that open-source technology and cloud computing keep their costs substantially lower than those of their ‘90s counterparts and therefore they don’t need to go public.”
Read the complete article here.
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