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By The Numbers #1

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bythenumbers

(Photo credit: Flickr/morebyless under CC-BY 2.0)

Here’s a selection of some of the interesting numbers from the news last week:

$8.3B

By this point just about everyone has heard that Microsoft acquired LinkedIn for $26.2B. Of note is that this all-cash acquisition is funded 100% by debt, triggering a Moody’s review that may possibly downgrade Microsoft’s AAA rating.

Why debt when Microsoft has $7.2B in cash and equivalents and another $98.4B in short term investments? The short answer appears to be taxes. Most of Microsoft’s available cash is held offshore and the company would face a significant tax liability to repatriate it.

From Microsoft’s latest 10Q filing, “of the cash, cash equivalents, and short-term investments as of March 31, 2016, $102.8 billion was held by our foreign subsidiaries and would be subject to material repatriation tax effects.” Thus, over 97% of Microsoft’s available cash and short term investments is not accessible to the company for domestic activity without triggering a significant tax event.

Given that Microsoft’s weighted-average stated interest rate on long-term debt is just over 3% and the assumed corporate tax rate is 35%, Microsoft saved approximately $8.3B by borrowing rather than repatriating cash. (Note that Microsoft is not alone in their preference to take on debt rather than repatriate cash. Apple pursued a similar strategy in February in order to finance stock buybacks and dividend payments.)

49%

Oracle released their Q4 / FY2016 financial results on June 16, 2016. For the fiscal year ending May 2016, Oracle’s total USD revenue was $37B, down 3% from the prior year’s revenue. However, even though total revenue declined, Oracle’s revenue from SaaS/PaaS activities was up 49% ($2.2B USD).

Oracle has been vocally shifting away from a traditional licensing model in favor of a subscription/SaaS revenue model. This trend – and Oracle’s newest results – are of particular note to those that follow The Software Paradox.

13M

Horace Dediu did a fantastic job unpacking the news from WWDC last week, and all his visualizations are worth exploring. The figure that most stood out to me were the 13M registered Apple developers, an 18% year-over-year growth rate in developers on the platform. According to Dediu’s calculations using various industry estimates of total software developers, “it’s therefore possible that Apple’s ‘market share’ among developers is close to 70%.”

If developers are the new kingmakers, it’s worth paying attention to the the thriving and expanding nature of the Apple ecosystem in the developer community.

Update to include Disclosure: Oracle and Microsoft are RedMonk clients.

One comment

  1. Great post, especially breaking don why debt when Microsoft has $$$.

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