Business Sense column
Date published: 5/15/2011
By Bill Freehling
have panned It's true the software giant announced this past week that it will pay $8.5 billion for Skype, which offers web-based phone and video communication services. But when looked at from Microsoft's perspective, the real cost of the deal is much less. And that perspective has important implications for U.S. tax policy. Microsoft's $8.5 billion purchase of Skype may be basing their analysis on the wrong price tag.
Microsoft recently announced that it had a whopping $50 billion in cash at the end of the first quarter. But $42 billion of that total was held overseas. The cash parked overseas was earned by Microsoft's substantial international business operations. Like other companies, Microsoft doesn't have to pay U.S. corporate taxes on the earnings of foreign subsidiaries unless it "repatriates" the funds into the U.S.