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The Microsoft mystery Add to ...

Reuters blogger Felix Salmon has taken a look at what Microsoft Corp. can possibly be thinking about by selling $3.75-billion (U.S.) worth of bonds when it has a massive cash heap - and he concludes that, no, it still doesn't make a whole lot of sense.

He contrasted the situation with Ford Motor Co. , which announced that it would sell 300 million worth of common shares to support its own cash levels or pay down debt. The reason here is simple: Corporations pay tax on profits only after they've made their debt-service payments. However, Ford has been a money-losing company for some time, which means that it is unlikely to pay tax. Therefore, the company benefits by having less debt.

In the case on Microsoft, though, issuing debt to buy back their own stock - a popular explanation for the former debt-free technology behemoth - is an odd move because there are no tax advantages.

"The main reason for the Microsoft bond issue, then, is signalling," Mr. Salmon said. "It's a way of Microsoft telling the market that it's still ambitious, that it still wants to grow, that it has some doubts about whether its $23-billion will suffice to fund its plans, and that it wants to lock in low rates now to help finance all manner of wonderful growth over the coming decades."

On that note, some commentators have mentioned they believe Microsoft could take a run at SAP AG . However, Microsoft's chief executive Steve Ballmer appeared to shoot down that suggestion in comments to reporters on Tuesday, saying: "It strikes me as a random rumour."

SAP shares were down in afternoon trading in New York.

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