US Companies Stockpiling Cash

Published by: Dave Simmons on 27th Oct 2010 | View all blogs by Dave Simmons
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US Companies Stockpiling Cash

Moody's Investors Service reported on Wednesday that US companies are stockpiling cash to the tune of nearly a trillion dollars, but few are likely to use that cash to expand business or create new jobs given the relative uncertainty about the strength of the overall economy.  The firm also suggested that as the economy improves, companies will be more likely to use excess cash on mergers and acquisitions or share repurchases.

The recession has prompted a number of companies to boost cash holdings by cutting costs and reducing investments in plans and equipment, and, as the corporate bond market got going again, companies further increased cash holdings by selling off debt and refinancing short-term debt maturities.

According to Moody's, as of the end of June 2010, non-financial US companies were holding $943 billion in cash and short-term investments, compared to $775 billion at the end of 2008.  The amount would be enough to cover the capital spending and dividends for the companies with $120 billion left over, the credit rating agency said.

Somewhere in the neighborhood of one-fourth of this stockpiled cash is held overseas, and is unlikely to be repatriated to the US, the report said.  $346 billion of the hoarded cash, or 37 percent of the total, is held by just 20 companies.  Cisco Systems leads the pack with a cash balance of just under $40 billion, followed by Microsoft with nearly $37 billion.  Google (about $30 billion), Oracle ($23.6 billion), and Ford ($21.9 billion) round out the top five.

Among industries, tech companies are holding the most cash, with $207 billion, followed by pharmaceuticals ($124 billion), energy firms ($105 billion), and consumer products with $101 billion in cash stockpiles.

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