"I came up with this incredibly conservative approach that I wanted to have enough money in the bank to pay a year's worth of payroll even if we didn't get any payments coming in," he said. "I've been almost true to that the whole time."
Facebook (NAS: FB) is taking this philosophy to a whole new level. The company raised $6.4 billion of cash after going public on Friday. Regulatory filings detailing its pro forma balance sheet shows Facebook now has $10.3 billion of total cash and cash equivalents.
How does that stack up against Gates' principle?
Accounting varies between companies, so it's hard to get an apples-to-apples comparison. But here goes: Facebook had total selling, general, and administrative expenses (SG&A) of $835 million in the 12 months ended March 31. With $10.3 billion of cash, that would pay its overhead expenses at headquarters for more than 12 years without a dime of revenue.
Even compared with Apple -- known for its ludicrously large cash hoard -- Facebook is still the new king of cash. And its cash in relative terms trounces other tech giants like Google, Cisco, and Microsoft:
Now, if we're really talking about overhead costs here, it might be appropriate to add in part of cost of goods sold. For Facebook that includes the salaries of workers at operating segments like server farms. Including these expenses would drop the company's how-many-years-can-you-last-without-revenue metric to something like eight years (it would also drop the figures for the other companies shown in the chart).
Either way, the numbers are huge. Facebook has more cash than it knows what to do with.
In fact, it virtually admits as much in its IPO prospectus. Here's what the company says about its new cash hoard (emphasis added):
We intend to use the net proceeds to us from our initial public offering for working capital and other general corporate purposes; however, we do not currently have any specific uses of the net proceeds planned. We may use a portion of the net proceeds to us to satisfy a portion of the anticipated tax withholding and remittance obligations related to the initial settlement of our outstanding RSUs. Additionally, we may use a portion of the proceeds to us for acquisitions of complementary businesses, technologies, or other assets. However, we have no commitments to use the proceeds from this offering for any such acquisitions or investments at this time.[http://www.fool.com/investing/general/2012/05/26/1-of-the-craziest-facebook-numbers-i-know.aspx, Morgan Housel, 5/26/2012; S&PCapitalIQ]
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