Morgan Stanley Comments On Microsoft Cash Growth

According to Morgan Stanley, Microsoft MSFT cash has grown from $20.7B in Q409 to $50.2B in Q310 despite MSFT returning $25B over the same period. Morgan Stanley said that even net $8.5B for Skype, MSFT's cash is high and cash flow generation is robust. “The Skype deal and 2011 Freedom to Invest Act have brought MSFT's cash distribution back to the forefront of the investment debate and our discussions suggest investors want a) clearer communication of the long term model and b) more aggressive capital return. We've worked with Morgan Stanley's finance, accounting and strategy teams to discern MSFT's best options. The best low risk option may be to increase leverage, take the dividend yield to 4% and commit to a buyback of ~$6B/yr. M&A can drive the best returns, but is higher risk.” Microsoft closed Friday at $25.03.