Microsoft forced to borrow to pay for Yahoo

Microsoft has admitted that it will slip into debt for the first time to fund the takeover of Yahoo

Matthew Sparkes
5 Feb 2008

Microsoft may slip into debt for the first time if the proposed Yahoo takeover goes to plan, as even its significant cash reserves cannot fund the largest ever technology takeover.

The company has suggested that half of the $44.6 billion purchase price will be paid in stock, while the remaining half will be covered with cash. A full cash purchase would be too large a financial risk, says chief executive, Steve Ballmer.

Although the company has huge liquid reserves, estimated at over $20 billion at the end of 2007, it will still need to take on debt to complete the deal. Several years ago Microsoft's cash reserves topped $60 billion, but has since been heavily dented by stock buy-backs.

The cash half of the deal will be covered by "a mixture of the cash we have on hand plus debt," according to chief financial officer, Christopher Liddell.

Microsoft offered to buy out Yahoo stockholders on Friday, after nearly a year of speculation over a potential deal, citing the need to create a credible alternative to Google.

Read more about: