« The 2006 Beloit Mindset List | Main | Catching Up: Nanotech, Federal Reserve in Jackson, and Stock Ratings »
Latest Stories
- Excel Wankers and Recession Averages
- Sorry, New York is Closed. Check Back Later.
- Catching Falling 2009 Earnings Estimate Knife
- Survivorship Bias in Global Markets
- Talking Positions on a Lazy-ish Retirement Portfolio
August 25, 2006
Google as Mutual Fund
Lots of people are making much of Google's filing earlier this month to try to avoid, given its nearly $10-billion cash holdings, being regulated like a mutual fund. While I see the entertainment value in the news, and I too am in awe at the company's cash-spinning capacity, I read this more as a reminder of how technology companies continues to collect cash, rather than dividend it back, even when they have no idea what to do with all the money.I mean, does anyone really think Google is building cash for some billion-dollar-plus acquisition, or that its capex plans are set to accelerate so much that it needs a multi-billion buffer on its balance sheet? I know I don't buy it. Technology companies remain the Scrooge McDucks of business: Building cash piles just because they can, shareholders be damned.
Sphere It
| 
Digg it
| 
Bookmark it
| 
Stumble it
| 
Facebook it
Agreed, back in my analyst days I use to push exactly that line of patter. But a few prominent datapoints of companies that paid dividends and grew -- wasn't Google supposed to be different anyway? -- would help disabuse large investors of that notion.
It's an arms race.
Only the paranoid survive.
Google would look really stupid if they gave all that cash back to the shareholders, and then the next day Microsoft bought Yahoo, wouldn't they?
Interesting paper by Kevin Warsh of the FED on why firms have increased cash holdings lately. May explain Google's behavior...
http://www.federalreserve.gov/boarddocs/speeches/2006/20060718/default.htm
Don't you think investors (particularly institutions) have some culpability in this, when they automatically take a dividend announcement as a sign the company can't grow anymore?