Who has cash to survive the downturn?
For those technology companies that have managed to save cash during the good times, they may be best positioned to thrive and make big bets in the bad times.
The Financial Times points out that many technology companies are cash-rich and intend to stay so in order to ride out the recession. Apple sits atop nearly $26 billion in cash, while Microsoft keeps $19 billion in its pocket (and is probably grateful that its bid for Yahoo was declined, given how that would have decimated its bank balance).
Surprisingly, IBM is relatively cash-poor, with only $3.3 billion in the bank, and Oracle? Well, let's just say Oracle needs its acquisition strategy to start feeding it fat profits because its bank balance is $700 million underwater.
As for open-source companies, Red Hat holds roughly $677 million in cash, and another $450 million in short-term investments and receivables, which compares favorably to its proprietary peers, when considering the small size of its employee base and funding requirements. Novell is much the same, while Sun Microsystems has more cash on hand but also bigger outlays it must service.
Private open-source companies demonstrate the biggest, if diffuse, saving power. My own company, Alfresco, has much of its venture capital investment dollars still in the bank, allowing us to ride out the recession, while companies such as Hyperic, SugarCRM, and others share this fiscal prudence.
When the recession recedes, and it will, those with cash will be best-positioned to manage their options. For the big technology companies, there will be greater leeway to take risks on research-and-development investments and acquisitions. For the smaller companies like mine, well, we'll have the option to grow at our own pace rather than having to sell to a larger company simply to finance operations.
In this economy, cash brings peace of mind, but it also brings options. Ironically, given that Apple and Microsoft have two of the biggest cash hoards, it may well be that money earned on the desktop will provide these vendors the best options for extending that dominance to the cloud.