Sure, but Time Warner shareholders accepted AOL equity at an over-valued price. THAT's the fleece - Time Warner kept being a company despite AOL's failure, but the ownership shifted dramatically toward former owners of AOL.
Also worth noting on the AOL/Time Warner comparisons everyone is making: Everyone knew dial-up was on the way out in 2000, they just assumed AOL would 'figure it out' because they were the current market leader. Not clear to me (other than maybe metaverse, controversially) what MSFT's looming problem they need to 'figure out' is.
Yeah, at least in traditional financial theory, if they can invest it in a way that has NPV of <$1, then they should invest that dollar, and if not, they should just return it.
There's obvious optics to draining the cash balance, but it's not a problem per se, because worst case, they just return it to shareholders and Net Income/EV should be unaffected.
MSFT has to figure out how to justify a 2.7 trillion market cap when their revenue is on the order of 170-180 billion. That’s a lot of sustained profitable growth.
Conveniently ignoring the fact that on that $180bn revenue, they generate $90bn in net income, resulting in a 30x P/E multiple (the actual way companies are valued), which is only slightly elevated vs. the S&P 500's historical average.
Conversely, what's wrong with McKesson, if their revenue is $250bn and growing, but their market cap is $40bn?
The larger you get, the harder it is to justify outsized PE multiples. Plenty of theory and empirical research supports this.
Even with their recent 11-12% correction their PE is ~33.5. [0] That’s higher than today’s S and P PE, and more than double the long term median (~15) and mean (~16) PE. [1]
This means that the market is betting on some combination of margin expansion and outsize revenue growth.
McKesson is in another industry with different margin and growth, and is valued differently.
