Lizzie,
There are two ways to generate cash flow: liquidate assets, or earn profit.
Cash flow by liquidating assets already on the balance sheet doesn't make shareholders any wealthier. It just increases the cash balance. You have to ask yourself how the assets got on the balance sheet in order to be liquidated.
Furthermore, the company can turn around and take this cash and turn it into assets which it can then liquidate. Looking only at cash flow from operations and ignoring cash flow from financing and cash flows from investing is what makes this merry-go-round possible.
If indeed the company is generating 2 B$ per quarter in cash and has done so for the last year, then clearly we would be expecting it to be piling up in the corners somewhere. But it isn't.
According to the latest 10Q, here are some year on year comparators
2003 2002 Change
Cash & Equiv: 21,197 21,456 (259) - 1.2%
Shareholder Equity 28,455 28,656 (201) - 0.7%
Shares 7,217 7,309 (93) - 1.3%
Sorry Lizzie, but there's no evidence of 2 B$ per quarter in value generation going on.
If we use your suggestion and account for stock options as *actual* expenditures, and go back over the last ten years, you might find that the *actual* expenditures of the company is about 9 B$ more than they've made in total. Which is where I came up with my "never made money lifetime" quip.
It appears you are looking at the part of the picture that the Silicon Valley spin-doctors want you to look at: cash flow from operations.
If cash is flowing out the back door as fast as it's flowing in the front door, it's kinda naive to be salivating over all the cash flowing in the front door. It's not like you'll get to spend it.
John |
