Microsoft, the world's largest software company is in the spotlight once again. This time not for the antitrust litigations but for its huge cash reserve adding up to a mammoth $50 bn. While some analysts agree with Microsoft's decision to pile up cash, there are others who are questioning this strategy.

Having piled up cash during the growth phase, the company now is trying to reap the benefits. No other non-financial firm has more liquid cash at its disposal, which only a few banks do. All the cash gives Microsoft a financial stability that most corporate managers would look for. With this amount of money Microsoft is as much a investment banker as a software maker. It also gives the assurance to investors that the company is stable and has enough resources to put to use in case of an opportunity. But having said that it would be naïve to think that Microsoft is accumulating cash without any purpose. According to the Research Stock Analyst, Rickwayman, "Based on Microsoft's past successes, I would have to assume that they are constantly evaluating how to maximize all of their assets, including use of their cash. Having cash reserve always is a prudent thing to do.

But Microsoft's investment strategy is as conservative as its business practices. To answer the critics as to what Microsoft is doing with all the cash, the company gave the details at the financial analysts meeting at company headquarters in Redmond in June. The company has divided its savings into two buckets. The first bucket of just $6.4 bn of its cash is invested in `cash' investments, which will mature within a year or so and are all risk-free. The other bucket of $42.6 bn was in short-term investments, which might yield more but are riskier. As of June 30, Microsoft's total investment portfolio actually stood at $62.7 bn.

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