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Google Starting To Manage Its Cash Mountain More Aggressively
Google now has roughly $26 billion in cash on hand. That mountain of money has apparently been getting very conservative returns according to an article appearing in Businessweek.
The article also discusses how Google has now turned its formidable technology and software prowess on its short term investments to more aggressively manage its portfolio. Accordingly Google has opened its own “trading floor.”
According to the Businessweek article:
Google’s trading room opened in January. The plan is to keep the war chest growing safely and ready to be deployed should the right mergers-and-acquisitions opportunities arise. The investment team has grown to more than 30 people, up from six three years ago. Many of the new arrivals are former Wall Streeters who left lucrative careers at Goldman Sachs, JPMorgan Chase, and other banks. The man in charge is Brent Callinicos, Google’s 44-year-old treasurer, who joined from Microsoft in 2007, back when Google had $11 billion in cash.
This is a surprising and impressive effort for the Mountain View company and may help it grow its war chest at a faster rate. That in turn could add billions more over time to that same cash reserve.
CEO Eric Schmidt has said that the cash isn’t going to be returned to shareholders any time soon. Google is holding on to the money presumably for more M&A action in the future.
Yet any major investment or acquisition is likely to bring more painful government scrutiny and potential blockage. That means the company is more likely to make regular, smaller acquisitions — indeed it’s almost compelled to — to use the money. Otherwise shareholders would be clamoring for a dividend or stock buy back.
Here’s the current allocation of Google’s cash and short-term portfolio: