Microsoft CFO speaks

Microsoft has a huge money mountain, and spending it requires careful planning, says expat Kiwi CFO

Chris Liddell, Microsoft’s expat Kiwi chief financial officer, has a nice problem — lots of cash.

Speaking at Microsoft’s recent Business Value customer event in Auckland, which was held to coincide with the pending release of Windows Vista and Office 2007, Liddell noted that for most of his career, “I’ve worked for companies where debt is the main balance sheet issue — but Microsoft is the opposite.”

With approximately $US40 billion (NZ$59 billion) in cash reserves, Microsoft has a huge money mountain, and spending it requires careful planning, Liddell says.

“We have to think about how much we spend on acquisitions, on research and development and on buying back stock — we’ve bought back US$20 billion worth since I’ve been in the job”.

Liddell started at Microsoft in August 2005, after serving as International Paper’s CFO for two years, a role he was appointed to after serving as chief executive of Carter Holt Harvey from 1999 to 2002, when it was half-owned by International Paper.

Before that, he was Carter Holt’s CFO. He has also worked for investment bank Credit Suisse First Boston and engineering firm Beca Carter.

At the Microsoft Business Value event, Liddell looked at the ten biggest companies now and 20 years ago, both in New Zealand and the US, and noted that one of the things that struck him most between the business scene then, early on his career, and now, is in how companies are valued.

He noted that today, intellectual property, goodwill and intangible assets are far more valuable compared to hard assets than 20 years ago.

A classic example, he told the audience, is Google, whose shares recently surged through the US$500 price barrier.

New Zealand companies are in a better position than ever to take advantage of phenomena such as Google, YouTube and Skype, he says.

“I’ve never seen a country better suited to taking advantage of the ‘long tail’ [the internet consumer phenomena identified in the book of the same name]”, he says.

“The quality of productivity and creativity here is phenomenal — we just don’t have the scale [of other economies].”

Productivity was a key topic of Liddell’s speech. He noted that while New Zealand has made significant gains in that area, they have has been achieved largely by bringing more people into the labour force and having staff work longer hours.

In the US, by contrast, he says, productivity has been achieved mainly through empowering staff through means such as ICT.

“That’s one of the reasons the US has had such a strong economy and low inflation in the last ten years”.

Liddell told the audience at the event that New Zealand needs more entrepreneurs who aren’t satisfied with building companies worth $10 million.

“We need more $100 million and $1 billion companies”, he noted, echoing an earlier comment by co-presenter Rod Oram that we need owner-investors of innovative companies, not just owner-operators.

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