Big names like Microsoft (NSDQ: MSFT), Google (NSDQ: GOOG) and Apple (NSDQ: AAPL) continue to sit on burgeoning piles of unused cash, which might just keep the buyout exit window for startups wide open. Together, the companies have over $50 billion in cash that’s just sitting there, not to mention their own shares. In his outlook for 2008, JPMorgan analyst Imran Khan predicted that large internet companies will keep on making deals to rid themselves of pocket hole-burning money. Chris Shipley, producer of the semi-annual DEMO conference, confidently predicted to Fortune that the upcoming event will resemble a win-a-date auction: “A lot of little companies are going to be picked up in some real sweet deals.” (Of course, that’s her bread and butter so consider the source.) Fortune editor Jon Fortt tosses out some possible deals, all of which appear to be pure speculation.
While it’s a safe bet that Microsoft and Google will keep on buying in the new year, Fortt sticks his neck out a bit in predicting that Apple will jump on the bandwagon, as well. The company now has over $18 billion in cash and its latest earnings report exposed that it can’t rely on the iPod for nosebleed growth forever, so the company might be forced to augment its organic growth strategy with deals. Certainly, investors will demand that the company do something with all that cash, especially if its earnings don’t regain the wow factor.
But a lot may depend on the economy. Google’s already been dinged, in part because it’s built a reputation of being loose with the pocketbook — if things slow down, investor tolerance for uneconomical purchases will wane. Microsoft turned in a winner with its latest quarter, but the bright spots were its traditional businesses and its organically grown Xbox business, not the internet stuff where it’s been so aggressive. For both companies, when they do buy, they could get tighter about how much they’re willing to spend. Even with all of this cash, it may be wishful thinking to say that M&A patterns will continue as they have been, if market conditions change.