Microsoft has a "problem" other companies could only wish for: what to do with its huge hoard of cash? And everyone seems to have an answer for spending the $38.7 billion in cash and short-term securities reported on Microsoft's balance sheet on June 30. Consumer advocate Ralph Nader believes the Redmond, Wash.-based behemoth should pay a dividend. Credit Suisse First Boston analysts want the company to buy back more stock. And one investor joked that Microsoft could have helped bail out WorldCom by giving the bankrupt telco a few billion dollars. Don't look for any of those options from Bill Gates and Co. For one thing, Microsoft's cash balance is not as enormous as it seems by at least one measure. And with big plans to expand into new markets such as entertainment and wireless -- plus the antitrust cases still looming -- Microsoft is more likely to reinvest in itself than declare a dividend or embark on a major acquisition in the near future. Microsoft, stung by bad investments during the Internet boom, is also more cautious now about where it puts its money. "
Microsoft is continuing to use its cash in a strategic way rather than issue a dividend, although the board does consistently review the issue of whether to issue a dividend," said Microsoft spokeswoman Katy Fonner. Investors say Microsoft's stash is just another reason to buy shares these days, but they generally agree that nearly $39 billion is more than even Microsoft needs. Just consider other companies. Wal-Mart ( WMT), ranked the sixth-largest company by Forbes -- compared to Microsoft's position at 17th -- has only $2.4 billion in cash on its books, although it reported more than seven times as much revenue as Microsoft in its latest quarter. Tech giant IBM ( IBM) had $3.6 billion in cash in its most recent quarter -- under one-tenth of Microsoft's war chest -- although IBM's revenue was more than twice as large. disastrous investment on cable, which lost $9 billion of a total of $12.4 billion invested. The company has said it intends to be more discriminating in the future. James Love, director of Nader's Consumer Project on Technology, points to that dismal record as another reason for declaring dividends. Currently "you have Bill Gates managing your money, where he's turned out not to be a phenomenal investor," Love said. The project is planning this fall to petition the Internal Revenue Service to review whether Microsoft has violated U.S. tax law that subjects a company with accumulated earnings "beyond the reasonable needs of the business" to a tax of 39.6%. Maybe then, if Nader gets his review, will Microsoft's cash hoard truly become a "problem."