This is what keeps me from being a shareholder of Microsoft: that they are willing to pay ridiculous premia to purchase speculative or middling businesses.
Think about it this way. $1.2B in cash would purchase ~39.1 shares of MSFT stock, had they repurchased stock instead of buying Yammer (at today's open of $30.70/sh, per yahoo finance). Those shares have a proportional claim on $106.7M of after tax earnings over the last 12 mos (approx $2.73/sh, TTM, again per yahoo finance). $1.2B represents 1/250th of MSFT's market cap.
Even if Yammer grows revenues at 100% y/y for the next 10 years (it won't), its cumulative after-tax earnings won't come close to the benefit shareholders would have received--esp when discounted appropriately for the risk--had MSFT simply bought back $1.2B worth of stock.
Don't get me wrong, Skype represented even more egregious profligacy. But my point is that I (and many others) would be far more interested in owning MSFT stock if they fired the entire corp dev team and replaced them with a small laptop that merely issued orders to buy back stock every quarter.
Silicon Valley used to view MSFT as a rapacious shark. Now it sees MSFT as a well-heeled but dim tourist--an interloper that has more money than brains and is willing to spend exorbitant sums for shinky trinkets. Sadly, MSFT has warmed to the role.
there's been a lot of work on skype, most of it coming in the next months. it takes months or even years for two big companies to merge and align strategies, not to mention products and tech are often shared behind the curtains so you wouldn't know about progress until some big news or big release, ie. wait till win8
Also,
1) potential to eventually sell MS products to yammer's customers.
2) being able to win other enterprise deals in competition with Salesforce/Oracle by being able to claim that you have something similar to Chatter.
Think about it this way. $1.2B in cash would purchase ~39.1 shares of MSFT stock, had they repurchased stock instead of buying Yammer (at today's open of $30.70/sh, per yahoo finance). Those shares have a proportional claim on $106.7M of after tax earnings over the last 12 mos (approx $2.73/sh, TTM, again per yahoo finance). $1.2B represents 1/250th of MSFT's market cap.
Even if Yammer grows revenues at 100% y/y for the next 10 years (it won't), its cumulative after-tax earnings won't come close to the benefit shareholders would have received--esp when discounted appropriately for the risk--had MSFT simply bought back $1.2B worth of stock.
Don't get me wrong, Skype represented even more egregious profligacy. But my point is that I (and many others) would be far more interested in owning MSFT stock if they fired the entire corp dev team and replaced them with a small laptop that merely issued orders to buy back stock every quarter.
Silicon Valley used to view MSFT as a rapacious shark. Now it sees MSFT as a well-heeled but dim tourist--an interloper that has more money than brains and is willing to spend exorbitant sums for shinky trinkets. Sadly, MSFT has warmed to the role.