Erikka Askeland: Company cash might not be enough for a soft landing

EXECUTIVES at Microsoft were quite right to sound pleased with themselves when they surprised the markets with their talk of a 51 per cent increase in profits in the first half of the year. The secret to their success was business spending - company bosses were looking at their four-year-old PCs and saying "right, time to get some new ones". That and they were also buying Office 2010 software and signing up for Microsoft "cloud" business services.

Bill Koefoed, Microsoft's general manager of investors relations, said the first quarter of the year was "this great sweet spot" in business spending that was "re-emerging after the downturn".

Microsoft's figures are a welcome sign that companies are starting to spend and invest - something they haven't done since the world's economy went pear shaped two years ago.

There's long been talk of a "wall of cash" being pent up on company balance sheets. All this dosh however is only being held by those that: A) haven't collapsed completely or B) had to repay debt really very quickly to their newly cantankerous lender.

But one of the reasons for that laboured wheezing sound being made by those bedraggled beasts of the US and UK economies was the fact companies had all but shut down capital investment.

Where the pre-crisis rule used to be that hanging onto cash was a waste of time and resources, fears of global meltdown turned the rules around and businesses became hoarders, with a resulting impact on the economy.

We might even be able to call Microsoft's bullish statements about company spend a delicate green shoot, which can be added to the salad of other recent third quarter announcements from big corporates and industrials - this week Shell, Exxon and Aggreko were others to unveil profit and revenue growth.

Then there's the CBI SME Trends Survey, which yesterday said that smaller manufacturers are expecting demand to strengthen over the next three months. Salad days, indeed.

Except in these times there's always a "but" when discussing the emergence of the economic tendrils. Microsoft noted that although the sales growth in the US and Europe was "stable and healthy", the big bucks were really coming from computer kit buyers in emerging markets.

The big question is whether the strength of cash-hoarding big companies (because the cash-starved small ones aren't really a part of this equation) is enough to build momentum in the face of some pretty stiff competition.

Next week the Fed is all but certain to pump more quantitative easing into the ailing American economy. And while some worry the amount of QE won't be enough, others warn it is too much already.

One bond market specialist likened QE to a state-sponsored Ponzi scheme.That's because QE is a bit like a painkiller - provides relief but may have serious side effects - and you'd rather not be in pain in the first place.

Other grim signs are those ominous spikes in bond yields in Ireland, Greece and Portugal and of course the fiscally prudent but likely painful cuts in the UK.

Alliance Trust also came out with a gloomy report yesterday that said UK consumers' financial wellbeing deteriorated slightly during Q3, raising the prospect that consumer spending will start to decline once again.

If it's all up to Microsoft customers to start spending a way out of this mess, they'd better dig deep now and fast.

See things in a new light

AND ONE more item about dark days. A survey landed on my desk with a gloomy thud suggesting UK firms are set to lose 18 billion in productivity over the next six months because of daylight savings time.

Now, some things are worth worrying about (see above, Ed). But turning the clocks back tonight (so you get up in time tomorrow morning, durr) is not one of them. If you are in Scotland, cavill about the fact you leave for work in the dark and return home in the dark too. But don't pay heed to every piece of nonsense fearmongering being paraded as "research". Life, and of course, daylight, is too short.