Bloomberg: Microsoft Among Those Preparing for the Worst

Cautionary story by Bloomberg on a late May gathering of treasurers from America's bluest of blue chip companies:

After watching credit dry up almost overnight as the subprime mortgage contagion spread in 2007 and 2008 and Lehman Brothers Holdings Inc. collapsed in September, companies were more preoccupied with stockpiling cash and extending debt maturities by selling a record $301 billion of investment-grade bonds in the first half.

And this concerning portfolio holding Micrsoft (MSFT):

“There’s still a good deal of precautionary borrowing taking place,” said John Lonski the chief economist at Moody’s Capital Markets Group in New York, a unit of Moody’s Investors Service. “There are a number of unresolved issues regarding access to capital.”

The $3.75 billion sale May 11 by Redmond, Washington-based Microsoft was its first ever and was done even though regulatory filings show the maker of Windows computer operating systems had $25.3 billion in cash and short-term investments as of March 31.

“It’s always better to issue when you don’t have to,” said Microsoft Treasurer George Zinn. “Microsoft has been evolving its capital structure over a long period of time. This is just part of that logical evolution.”

Things are likely to get worse before they get better. Which will no doubt require a strong stomach for many holdings if (when?) the broad markets swoon. Yet Microsoft shouldn't be a cause for concern.

Comments

[Daniel M. Ryan]

$3.75 billion is a lot less less than Microsoft's cash flow from operations for the last quarter. Owners' earnings - operations cash flow minus capital expenditures - was $5.412 billion in that timeframe.

I don't think Microsoft will have any trouble paying it off...

[John]

@Daniel: Barron's described Foot Locker's balance sheet as "rock-solid." Perhaps we can call Microsoft's bulletproof? :-)