Wednesday screencast: MSFT malinvestment

Microsoft’s decision to spend $8.5 billion in cash to purchase Skype has unleashed a wave of commentary.  The consensus is that Microsoft overpaid for Skype in what seems like a one party auction.  The decision to purchase may, or may not, turn out to be a good one for Microsoft depending on their ability to integrate and enhance the Skype platform.  More importantly it highlights the question of malinvestment on the part of large, cash-laden companies like Microsoft.  These companies feel compelled to spend their cash on acquisitions and share buybacks and avoid paying higher dividends to their shareholders.  A company like Apple stands in contrast where their unwillingness to spend their growing cash hoard on anything other then small, fill-in acquisitions.  In today’s screencast why Microsoft should be broken up.

Items mentioned in the above screencast:

Barry Ritholtz, “Microsoft remains hugely profitable today, but increasingly irrelevant.”  (Big Picture)

Malinvestment and Microsoft.  (Barron’s)

Microsoft just pulled a “Microsoft” in its purchase of Skype.  (Contrarian Edge)

Mars needs dividends.  The case of Microsoft.  (Credit Writedowns)

Why Microsoft should just be broken up.  (Herb Greenberg)

The transformation of Microsoft from growth stock to value trap.  (YCharts)

Daily price chart of Microsoft (MSFT).  (Finviz)

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