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Microsoft Begins Financial Strategies to Protect Against Massive Inflation

By: Steve Johnson

5/13/2009 - 47 Comments

Yesterday I was reading about how many of the large banks are now trying to raise capital as suggested by the results of the bank stress tests and I found other businesses also trying to raise cash.

Apparently, Microsoft is trying to raise $3.75 billion dollars by offering long term debt securities.  Microsoft plans to offer 5, 10 and 30 year bonds.  This is especially interesting to see Microsoft raising capital when the company has over 25 billion in cash and short term investments.

I think MS is looking at the bigger picture of the dollar weakening, dropping several percent just in the last few weeks.  If they can find investors to sell bonds to at a fixed low interest rates, while long term interest rates look to be increasing as the dollar sinks, they could make money by investing the money in just about anything.

This is a play on the government’s massive money printing that is sure to sink the value of the dollar. MS is making a long term investment strategies, betting against the economy to protect them against the coming inflation.

In an article last year, How Inflation Will Change Things and in another article, I wrote about how inflation causes businesses to change. 

“In an inflationary economy, cash management becomes a much higher priority because of the drastic fluctuations in the daily value of the currency.

Business will change, as production and sales are reduced while accounting departments are increased, as cash management becomes vitally important to the survival of the business.  In an inflationary economy, marketing departments shrink and accounting departments grow, as the daily management of money becomes more important than producing or selling more products. “

Cash management becomes vitally important as the daily management of money becomes more important than production or sales.  That is what Microsoft is preparing for. They see the wave of inflation that is coming and see the need to have lots of cash available to stay on top of the mess that inflation causes.

Inflation forces businesses to focus more on money management and less on the production of there products. MS is making a strategic shift into the business of money management.

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