Microsoft on Monday said in a regulatory filing that it will issue bonds for the first time to raise and $3.75 billion of capital. And given that Microsoft doesn't exactly need the money you can't help but wonder what the software giant will do with the dough.
For the record, Microsoft is using the net proceeds from the bonds for "for general corporate purposes, which may include funding for working capital, capital expenditures, repurchases of our capital stock and acquisitions." Microsoft confirmed the pricing in a statement.
Bloomberg reckons that Microsoft will buy back shares. Boooorrrrrinnnngggg. Let's go the acquisition route. Microsoft has an AAA credit rating and will have Wall Street fawning over these bonds. Wall Street already fell in love with IBM, Cisco and Oracle bonds. What's not to love about companies with gobs of cash issuing bonds?
And like Cisco and Oracle Microsoft could become acquisitive (more than it already is). Microsoft could buy Yahoo's search business (highly likely) or maybe take a run at SAP (less likely). Activist shareholder Eric Jackson urges Microsoft to go shopping and notes that the software giant can easily ramp up its debt.
Microsoft may just be taking advantage of cheap rates to buy back shares, but chances are it's bolstering its war chest for something. That something could be a search deal with Yahoo or a systematic plan to go shopping just like Oracle has.