Microsoft’s expat CFO Chris Liddell told an Auckland audience yesterday the global economy is entering what he termed “the new normal,” or years of low growth that will seem hard-scrabble compared to the artificially high levels of the past decade, fuelled by the overheated credit.

Read also: Microsoft CFO: danger of Great Depression-level meltdown has passed.

Faced with “the new norm,” any company’s first focus should be on cash, said Mr Liddell.

“You might say: ‘You [Microsoft] have got $US30 billion cash - where’s your liquidity problem?” said the CFO. (At its 2004 peak, Microsoft (NAS: MSFT) actually had $US64.4 billion in cash. The company began to consciously reduce its cash pile from that point and began paying a dividend, and instigated a series of multi-billion stock buy-backs. Recently, Mr Liddell has been building it back up.)

But any business will benefit from the extra flexibility provided by a focus on cashflow, said Mr Liddell.

In Microsoft’s case, “Coming out of the crisis there will be acquisition opportunities we didn’t have before. A lot of people’s business models have come under pressure and prices have come down.”

Mr Liddell didn’t want to name any specific takeover targets, or even sectors, but one obvious example of his theory is Yahoo. In 2007, when the two companies began their extended courtship, the portal was valued around $US42 billion. Today, even after the pep-up of the two companies’ recent search advertising allowance, Yahoo’s market cap is around $US21 billion.

The CFO predicted a merger and acquisition boom. “A lot of tech companies are cashed up,” said the one-time Carter Holt Harvey CEO. All will be looking for takeover targets. “For the world as a whole they’ll be a whole lot of M&A”

“We’ve aways been acquisitive,” said Mr Liddell.

Since he became CFO five years ago, Microsoft has bought one or two companies a month, although many of the deals have been under the radar in the region of $US10 million to $US15 million.

Now, it’s possible his company will look at larger targets, said Mr Liddell.

Best time to load up on debt (if you're AAA)
Earlier, at a July 30 briefing for US analysts, the Seattle-based Mr Liddell said his company generated $US15 billion cash in the past year.

In May, the CFO also led the company's first ever foray into the debt market, raising $US3.75 billion in a bond issue.

"Ironically, in the worse debt crisis of the world, we actually had our first entry," Mr Liddell told the analysts.

"The reason for that is quite a simple one. As one of the few AAA companies in the world, we had access to it. We had access to it at unbelievably cheap rates. So we borrowed 5-, 10- and 30-year money at an average after-tax cost of 2.3 percent. We don't think that's ever going to be lower than that, of any significance. We are issuing about $2 billion of commercial paper at an after-tax cost of about 10 basis points.

"So our debt has never been cheaper, and I basically have the view that if you're ever going to borrow debt, you do it at the time when you don't need it. It's a fairly fundamental principle of finance."