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Microsoft to sell bonds for the first time

updated 04:55 pm EDT, Mon May 11, 2009

Microsoft offering bonds

The world's largest software vendor, Microsoft, is selling bonds for the first time as of today. Despite having $25 billion in cash, the company has at least enough demand for $15 billion in bonds, an investor says. According to a Monday WSJ report, the company will sell notes that mature in five, 10 or 30 years. The prospectus says net proceeds from the sale will be used for general corporate purposes such as working capital, capital expenditures and repurchases of capital stock.

"It's a nice diversifier," said Mike Kastner, the head of fixed income at Sterling Stamos Capital Management. "It has a lot of characteristics that people want in their portfolios," he added, calling Microsoft a "super blue chip name."

Price guidance shows the risk premium being offered on the bonds is low, indicating investors are willing to accept less to own the bonds.

People who are in the know about the offering believe the five-year note would have an interest rate around 95 basis points over comparable Treasury yields, while the 10-year and 30-year notes sit at about 105 basis points more than Treasury bonds.

Some believe Microsoft is raising money to exchange Internet search assets with Yahoo, as recently rumored, or buy out SAP to increase its presence in business software.

 
Previous Comments

cynical

05/11, 05:35pm reply

This exploitation of general cynicism with regard to the true value of many stocks and shares has to make this latest Microsoft move the most undeniably evil thing they have ever done. Do they want to become a bank? Sucking between $6 and $15 Billion out of the investment economy for their own purposes poses a clear and present danger to the U.S. economy. Can you trust Steve Ballmer any more than any of the guys at Bear Stearns?

Feathers

Forum Regular

Joined: Oct 1999

+1

wow

05/11, 05:37pm reply

microsoft is so smart, first they pay a dividend and now they need to loan money from the same investors.
Microsoft is becoming a bank, talk about diversifying.

Peter Bonte

Fresh-Faced Recruit

Joined: Aug 2001

+2

Anywho who...

05/11, 05:40pm reply

invests this way needs to really have their head examined. I don't even see MS being around in 30 years, maybe 10 even. They are too far behind the ball unless they get new executive management and leadership who have a vision and these people do not grow on trees according to my sources in the headhunter business community.

Bobfozz

Fresh-Faced Recruit

Joined: Jul 2008

+1

re: cynical

05/11, 05:42pm reply

Didn't think about that, i rather invest in CityBank and i hate that bank to the bone.

Peter Bonte

Fresh-Faced Recruit

Joined: Aug 2001

0

you people

05/11, 06:19pm reply

have no understanding about business and the use of capital.

gor3don

Fresh-Faced Recruit

Joined: Nov 2005

-3

we people

05/11, 06:28pm reply

oh, banks and executives do?

MS asks money from us to pay for there investments, that part we all understand. ok, when i take a bond for 30 years and MS is dead in 20 years, how does that work out for me?

Peter Bonte

Fresh-Faced Recruit

Joined: Aug 2001

0

re: we people

05/11, 11:47pm reply

So you're saying we should stop trading bonds period? That's what has this economy in such a mess. There's no guarantee any company will be around in 30 years. I can't think of a single company that I would guarantee will be around in 30 years, including Apple (heck 10 years ago Apple was almost dead). Your bank has no guarantee you won't drop dead in the middle of a recession when they can't unload your house. Yet they still make loans.

Banks and companies NEED to start lending/borrowing again. The entire world revolves on credit. It always has. It always will. Unless you know how to change that (and people a lot smarter then you have failed) then let Microsoft issue its bonds. Heck they sound like a great deal for those with the ability to buy.

No need for all the hate just because it's Microsoft, this is how the world works.

fubar_this

Fresh-Faced Recruit

Joined: Jul 2006

+1

waiting...

05/11, 11:48pm reply

Actually I'm waiting for President Obama to nationalize Microsoft so we can put a fork in that too.

paulgunn

Fresh-Faced Recruit

Joined: Oct 2001

0

re: we people

05/12, 02:16am reply

For the system to work we (the people) at least have to trust it and the company that we lend it to. Why would we trust a company that doesn't even have a governmental backing?

When i have cash on a bankaccount and the same amount on the same bank as a loan, when the bank goes bankrupt i will still have to fulfill the loan but lose the cash. The current system is cranky, unfair and not trustworthy anymore, we need change and i hope Obama has the balls to do it.

Peter Bonte

Fresh-Faced Recruit

Joined: Aug 2001

0

makes you wonder

05/12, 02:45am reply

(1) does Microsoft really have 20 billion left or are their accountants hiding the widening losses in the market place (most recent quarter, zum Beispiel)

(2) will Microsoft be around in even 10 years? As small businesses increasingly defect to the Apple platform and realise 10% savings on their IT budgets, larger businesses won't be far behind; worker frustration goes down, productivity and happiness in the workplace go up. Perhaps the only reason Microsoft has survived this long is that no one has been brave enough to drop the few hundred million to write for enterprise

Someone will

Microsoft sees the dangers and is trying to staunch the haemorrhage at the consumer level; once a consumer uses a Mac at home and is converted, that consumer wants to take the platform to work and be as productive

jcsegenmd

Fresh-Faced Recruit

Joined: May 2009

+1

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