What appals me the most about the Norwegions and Europe is they are only focusing on Apple's iTunes saying it's a closed system when iTunes is essentially the most open system compared to any of the other online retailers of online music.

Hahahaha, oh, that's funny. What, you were serious?

Microsoft is probably the most closed system of them all with only Zune compatible players and IE6 or IE7 browers required to even get to there stores. Most others require the same browser restrictions leaving Mac users out completely.

Well, since Mac users are really a small part of the big pie, you should stop taking yourself so seriously. But, beyond that. Apple requires you to use iTunes to access their store. MS requires IE 6 or 7. How is either different then the other?

The WMA stores may not work on macs (don't really need to, depending on what you want to do with your music), but at least if you buy your music from Napster or WalMart or the like, you can play it on a myriad of devices, not just one, which is what Apple limits you to.

One sided argument doesn't work here and now Apple is proving once again that it has the most open system of them all with DRM free music.

They never said it was a one-sided argument. Apple is the biggest reseller of digital music. Why wouldn't you sue them? If you sued napster and won, Apple would say it didn't apply to them and you'd have to sue apple to get the same verdict.

You go after the big company to fix it for all people. If they went after MS's Zune (which they can't do since the store isn't available in Norway, but why quibble over details), would you be crying the same river for MS?

Uhm, are you even commenting on the right article, or did MacNN's programmers forget a "where" clause again?

First of all it's about time that analysts are looking more closely at Microsoft's unappealing business model and wondering why a company that has it's hands in so many areas hasn't seen any stock growth in 6 years. Stock growth is a very good measure of the public's confidence in a company - even though it may not be the general public who is buying the stock.

The comments above about cash on hand are both right and wrong. When a company becomes the size of Microsoft and Apple and is rolling along generating huge amounts of revenue and net profits it won't be able to spend most of it. In a perfect world it would spend a much larger percentage on R&D but doing that adds underlying costs that can show up directly on the balance sheet that a company has to produce quarterly. There is a balance between how much a company spends on R&D and well run company's find that and stick to it.

So, for a mature company, having more cash on hand is a better thing that having less. You get all the benefits of spending some and you get to have some as reserves. You also earn interest (which for billions is non-trivial).

Something serious is going on in Redmond for them to have blown through so much cash. Xbox is hemorrhaging cash with no profit seen any time soon (real profit - not account shifting profit). Zune is another money loser. MS sells Windows and Office and those are their only real money makers. Everything else that they do is a drain.

I keep a pretty close eye on my AAPL shares... as far as I know there has been only 1 stock split in the last few years, when AAPL went above $100 and stayed there, the company split the shares because they did not want to have a share price that high.

Granted, in the next year or so we may see another stock split since it's doubtful AAPL will go much below the mid 80s to 90s where it's been lately, but that split has not happened yet!

And btw, subpop knows what he is talking about and testudo doesn't (big surprise). Even banks aren't supposed to keep too much cash on hand, because that means that money is not out there seeking opportunities to make money for shareholders.

Setting aside the question about how much is too much cash, the thing that's really interesting is where they are spending it. Even if they have "too much" cash, those that say less is better say the thing to do is invest it (R&D, acquisitions, etc). But what MS is doing is using it to pay increased dividends to share holders. Basically, it's a bribe to not sell the stock! For how flat the stock price has been in the past several years, imaging how much lower the price would be if they didn't start paying out dividends!

This is a bad way to reduce your cash reserves (from an investors stand point), not only are you artificially propping up your stock price (misrepresenting company performance to those foolish enough to no look beyond stock price); but you are also reducing the company's value by spending your money in a way that won't bring a return on investment.

It doesn't seem like everyone quite knows how or why dividends work: Here's to clear up some misconceptions.

why a company that has it's hands in so many areas hasn't seen any stock growth in 6 years

For how flat the stock price has been in the past several years, imaging how much lower the price would be if they didn't start paying out dividends!

If a company is paying out dividends, that inversely affects the stock price as business profit is filtered back to the owners of the business. It's the same thing as the sole proprietor of a small business taking "his share" of the profits. Technically, stocks are "supposed" to (but don't because of speculation) match the net value of a company. When that value is reduced because assets (cash) are removed and given to the stockholders, the stock value should drop by approximately the amount of the dividend (the company is now worth less because it has fewer assets). Thus, the stock would actually be GROWING in value of the dividends were not paid, not shrinking (or in this case, remaining stable despite the dividend payments, which indicates that the stock is still increasing in value, though offset by the dividends).

Basically, it's a bribe to not sell the stock!

Actually, technically, dividends are the ONLY reason that investors by stock, either explicitly or implicily. When you invest in the company, you expect a return on the investment. The stock value at any given time is what the market thinks the "present value" of all future returns (dividends) from that investment. Some companies do not make dividend payments, so the stock value increases as the company's value increases, but there is still an expectation that a) one day (maybe hundreds of years from now, such as HBC) the company will either shut down and sell all the assets, giving the value back to shareholders (dividend) or b) like most companies, will distribute that value over time as the company generates it.

It doesn't seem like everyone quite knows how or why dividends work: Here's to clear up some misconceptions.

why a company that has it's hands in so many areas hasn't seen any stock growth in 6 years

For how flat the stock price has been in the past several years, imaging how much lower the price would be if they didn't start paying out dividends!

If a company is paying out dividends, that inversely affects the stock price as business profit is filtered back to the owners of the business. It's the same thing as the sole proprietor of a small business taking "his share" of the profits. Technically, stocks are "supposed" to (but don't because of speculation) match the net value of a company. When that value is reduced because assets (cash) are removed and given to the stockholders, the stock value should drop by approximately the amount of the dividend (the company is now worth less because it has fewer assets). Thus, the stock would actually be GROWING in value of the dividends were not paid, not shrinking (or in this case, remaining stable despite the dividend payments, which indicates that the stock is still increasing in value, though offset by the dividends).

Basically, it's a bribe to not sell the stock!

Actually, technically, dividends are the ONLY reason that investors by stock, either explicitly or implicily. When you invest in the company, you expect a return on the investment. The stock value at any given time is what the market thinks the "present value" of all future returns (dividends) from that investment. Some companies do not make dividend payments, so the stock value increases as the company's value increases, but there is still an expectation that a) one day (maybe hundreds of years from now, such as HBC) the company will either shut down and sell all the assets, giving the value back to shareholders (dividend) or b) like most companies, will distribute that value over time as the company generates it.

Jhorvatic is correct. When Apple was in the stump, prior to 1997, it was burning over a billion dollars a quarter. Rounded off that is a four billion dollar loss a year. It doesn't take a genius to see a company that only has a few billion in cash and is burning cash at that rate is going to be in trouble quick. In fact, that was the exact situation Apple found itself back in 1997.

Jobs killed off a lot of potential, and even somewhat profitable, Apple businesses to stop the negative cash flow burn. It even went to Microsoft to get a 100 million dollar cash infusion.

I disagree with Subpop. Sure, a business is not a bank (unless of course it is bank), but there are different kinds of investments, some very risky, some moderate, and some safe. When you invest in a company, one of the factors you look at is how a company uses its cash on hand, and whether a company does dividends.

I do not do risky investments because I do not have a lot to lose. Besides its product portfolio, Apple is a safe investment because it has a lot of cash on hand to weather a storm. That is not to say Apple does not invest money as it does, but Apple manages itself conservatively. Even Apple's cash on hand is gaining interest.

Microsoft several years ago had such a cash hoard that it no longer made sense to keep growing the pile. It simply couldn't invest that type of money quick enough, and it had plenty of money to weather a storm. At that point, it made sense for Microsoft to offer a dividend, which it did. Microsoft pays a good chunk of money out to investors, so it doesn't grow its stash as quickly.

Testudo shut's down his Windows Vista wannabe mac equivilant, slowly rolls back in his chair and throws his hands behind his head. He sits, trying to come up with an original thought/argument(other than his usual "if it were MS in the spotlight, all you apple fan boys...). Meanwhile, his poorly assembled wannabe computer chair he purchased from a company that it is a subsidiary of Microsoft, gives way. The air compressed cylinder controlling the raise and lower functions bursts through the poorly manufactured seat of the chair and jams right up his @$$. Testudo remains still, trying not to move. The cylinder inching deeper and deeper (you get the picture). All along, Testudo grins with enjoyment, for this very situation is similar in feeling to what Testudo experiences on a daily basis. Moral of the story. He is angry and lonely and can only find pleasure in sticking/inserting things into his @$$. You wouldn't have anything better to do than troll MacNN if this was your life. Have sympathy for the guy. Embrace his awkward obsession. Testudo, we don't know how it feels to insert things in our @$$'s (as you do) but we do feel your pain. Write on Testudo. We are all laughing with you (as far as you know).

So, for a mature company, having more cash on hand is a better thing that having less. You get all the benefits of spending some and you get to have some as reserves. You also earn interest (which for billions is non-trivial).

Having "cash" is good, don't get me wrong. As was pointed out by someone else, you need cash for R&D and investing (which is why companies keep it). The danger with having too much cash on hand is that it gets invested poorly. In fact, your second argument specifically outlines what happens when a company hangs on to too much cash:

Something serious is going on in Redmond for them to have blown through so much cash. Xbox is hemorrhaging cash with no profit seen any time soon (real profit - not account shifting profit). Zune is another money loser. MS sells Windows and Office and those are their only real money makers. Everything else that they do is a drain.

First off, cash flow != profit, even in the real accounting sense. If it did, R&D wouldn't be something many companies would invest in.

Products like these that require a massive amount of R&D aren't going to be expected to produce profits immediately, which is why the R&D is capitalized and amortized in the profit projections. This is the same as with drug manufacturers that have to expense or capitalize R&D - its their business. This isn't "fancy" accounting to blow up numbers (in fact, Microsoft has more often been accused of being overly conservative in their profit calculations, not overly agressive) it is standard GAAP. Cash outlay on something that will pay for itself over time cannot be expensed all up front (that WOULD be number manipulation, but for other reasons).

Of course, if they ARE loser investments, then we will see some write-downs in the future. I have a feeling, at least on the vid-game front, that the XBox 360 wasn't as bad an investment as people seem to think - they are doing many things right with that platform and the future returns are going to pay for it.

Jhorvatic is correct. When Apple was in the stump, prior to 1997, it was burning over a billion dollars a quarter. Rounded off that is a four billion dollar loss a year. It doesn't take a genius to see a company that only has a few billion in cash and is burning cash at that rate is going to be in trouble quick. In fact, that was the exact situation Apple found itself back in 1997.

So which came first, the chicken or the egg? Where do you think the money-losing investments at Apple came from (well, other than the lack of leadership back in the 90's). Why do you think they were burning so much money?

As I've said before, I agree that a company needs cash, but it doesn't need (or want) cash to spend on "weathering the storm". In fact, until Jobs came back, that's exactly was Apple was trying to do - throw money at its problems.

Apple wasn't saved by having billions in the bank, and the cash never COULD save them. It was smart decision making and leadership (which is what you've also agreed with in your statement) that saved the company.

Jobs killed off a lot of potential, and even somewhat profitable, Apple businesses to stop the negative cash flow burn. It even went to Microsoft to get a 100 million dollar cash infusion.

This is the crux of the argument - what is profitable? If a project was kicked off, it's likely that is wasn't profitable enough given the amount of capital needed to invest in the project and the future returns given the economic cost of capital. This is precisely where the stale money argument gets complex. Cash is expensive. In most cases, the interest paid on cash in a bank account isn't even a drop in the bucket compared to the return possible by investing it in company projects. The problem is, there are a limited number of projects a company can invest in that will make a return equal to their cost of capital, so they start investing in projects that actually REDUCE value because they have a negative net present value.

This is precisely why giving this cash out to investors in dividends is so important: so that THEY can invest it (either back in the company in the form of buying more stocks, or investing in another company that will actually DO something with it). If I wanted bank interest on my cash, I would put it in a bank.

well, that's a few billion more than i have ...

what is interesting over the past couple years, for sure:

* Apple's been gaining cash reserves -- MS "bleeding"

* Apple's stock price climbing -- MS not falling, but plummeting in value

You fixed your company, you made the movie now buy Chrysler, it's going for a song. Get Disney to thow in a few bucks.

Their customers will love you and they make some pretty nice cars too.

Make Al happy and go green. Heck make him the pitchman!!

Daimler failed because as a famous ad once read: "Maserati: Style, they haven't even heard of north of the Alps"

Well Microsoft is bleeding cash because Apple is a money sucking vampire! Also it does not help that they shot them self in the foot with Vista.