January 29, 2014 (Chinavestor) We took four of the best tech companies under scrutiny focusing on cash flows. These are Apple Inc. (NASDAQ:AAPL), Cisco (NASDAQ:CSCO), IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT). The question is: who generates the most and who needs more? This issue is burning one for Apple Inc. (NASDAQ:AAPL), a company that delivered a solid quarterly report yet it fell hard on lack of growth. Apple's big question is what to do with the money? How can they return it to shareholders? Cash dividend a stock buyback is the answer of the management. Is this a good thing though?
Similarly to Apple Inc. (NASDAQ:AAPL), IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT) are in the same boat. Both IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT) generate an awful lot of free cash flows. See charts below. But here are some differences. IBM has been buying back its own shares at an astronomical clip and now hold more treasury stock then total liabilities & shareholders, equity combined! IBM (NYSE:IBM) undertook a very ambitious dividend payment plan as well. As a result, IBM (NYSE:IBM) is now cash starved and has had to take on increasing amount of debt just to keep up with the share buyback and dividend payment.
Microsoft (NASDAQ:MSFT) is looking a little better from a cash point of view. But this company is marching the same road as IBM (NYSE:IBM). Now that its committed itself to a serious share buyback as well as dividend payment, debt financing came to play...
Finally, Cisco (NASDAQ:CSCO) is on the menu. Good news is that Cisco (NASDAQ:CSCO) hasn't made such an ambitious commitment to share buyback and dividend payments as IBM and MSFT did. This gives it some breathing room when it comes to cash flow. CSCO has plenty of cash and no obligation to stave it off.