Thursday, December 21, 2017

Tech has too much cash, hopefully with tax bill they consider distributing it

Ignoring the Tech Tsunami doesn't address the problem of too much cash which the tax bill may help in its distribution.  Too much cash, how can that be a problem? First and foremost the static return on the outstanding cash diminishes earnings growth.  Secondly, managing that cash changes the corporate culture as prudent CFO's rather than risk taking innovators rise in the hierarchy. Finally there is no need for so much cash because tech investments only require a few billion dollars, literally pocket change, and the danger from too much cash is that the company strays from its core competency and buys something stupid. With this new tax bill rich tech should consider dividend distributions to reduce their cash positions to one year's earning and let the shareholders find other investment opportunities.       

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