Microsoft Corp. today announced that its board of directors approved a new share repurchase program authorizing up to an additional $40 billion in share repurchases with an expiration of September 30, 2013.
The board of directors also declared a quarterly dividend of $0.13 per share, reflecting a two cent or 18 percent increase over the previous quarter’s dividend. The dividend is payable December 11, 2008 to shareholders of record on November 20, 2008. The ex-dividend date will be November 18, 2008.
In addition, the company stated that it has completed its previous $40 billion stock repurchase program. Microsoft has returned over $115 billion to shareholders through a combination of share repurchases and dividends over the last five years.
“These announcements illustrate our confidence in the long-term growth of the company and our commitment to returning capital to our shareholders,” said Chris Liddell, chief financial officer of Microsoft, in the press release.
Microsoft also announced that its board of directors has authorized debt financings from time to time of up to $6 billion. Pursuant to the authorization, the company has established a $2 billion commercial paper program. Microsoft intends to use the net proceeds from any debt financings for general corporate purposes, which may include funding for working capital and repurchases of stock.
The company received corporate credit ratings of AAA and Aaa by Standard & Poor’s Rating Services and Moody’s Investors Service Inc., respectively. The commercial paper is rated A-1+ by Standard & Poor’s and P-1 by Moody’s, the highest ratings available from both agencies.
“The company’s strong credit quality coupled with investors’ current appetite for high quality paper provides a unique opportunity for the company to establish its first-ever commercial paper program and enhance its capital structure,” said George Zinn, treasurer of Microsoft, in the press release.
Source: Microsoft Corporation
brit: “they are effectively pumping $40 billion into the US financial system by doing this, sure it might be over a period of time but in the current climate this is good news, it also has propped up the share price on a bad day for the market, shares that as has already been mentioned you all probably hold through your pension schemes”
While I am not slamming Microsoft for what they did, I am certainly not going to cheer it as altruism. Microsoft has sat its fat bloated monopolistic ass on the back of the tech economy for far too long, and it certainly is not a kind and generous company.
They got where they are not by lying, stealing, cheating, illegal practices, contempt of the legal system, cheating consumers, government, partners, and when they were able to beat the life out of the last of their competition they laid back in their hammock and jacked up their prices and collected fat profits for their monopoly and stopped doing any more work.
ralph from berlin: “and start to pay a fucking dividend.”
I cringe when I see that, same reaction I get when people demand that Apple license it’s crown jewels OS to generic PC box assemblers.
1 Only invest in the stock market if you’re willing to take the risks.
2 Don’t invest in a company that doesn’t pay dividends and then complain you don’t get dividends. If you want dividends, invest in a dividend stock.
3 Apple is a growth company. The current stock market conditions not withstanding, they are an excellent investment opportunity, and will continue to outperform the rest of the stock market, especially the tech sector for the foreseeable future. The stock market is having problems, not Apple. Invest for the long term and relax, or find somewhere else to put your money.
Folks,
If MS truly thought their shares had potential…
…wouldn’t the executives buy up the shares, realizing any gains (heh) and dividends themselves? Ballmer in particular should be scooping up as much of MSFT as he can get, to help ward off the inevitable coup.
IMO these would be a much bigger vote of confidence, than having the company do the buying.
That $40 billion in cash may be worth more than MS stock. At least they might get a 15 return on cash. Remember the money is not being invested in new products and businesses. As for the share price, technically it should make no difference because the value of the company will be adjusted to reflect $40 billion less cash.
What did the last buy back accomplish? Eventually, their stock went down again. I admit, it is better than paying a one-time dividend.
Apple have stated they are saving their money for acquisitions as well as for a cushion in the event of an economic downturn.
For a quit entry into the corporate market, they might buy Sun.
Sorry, I meant 1% return.
@money first,
excellent point!
Irrespective of all the bullsh*t excuses and economic doublespeak here, anyone can see that the reason for this is simply to keep shareholders happy.
When a company screws up as publicly as Microsoft has lately, and the momentum and public confidence is seemingly sliding away, investors naturally start to wonder why they hold so much stock in MS and what exactly they get out of it. It’s not like it’s climbing up like a rocket or anything.
This is just a nice bunch of carrots for any unhappy investors, that won’t affect MS’s bottom line in any negative way. Simple.
“Companies should be banned from buying their own stock on the grounds that it is manipulating the stock price.”
Why? buying back stock is one of the best ways to return money to shareholders at low tax rates.
“Let the market determine a fair market price.”
Which it does, even here.
“(I know, kinda bold thing to say these days).”
No, just stupid a stupid ignorant thing to say, ignorant of the financial effects of share buybacks.
“buy back the stock in times like these to protect your shareholders”
Again ignorant. No-one is “protected” in a buyback. The company expends cash, it retires shares. less shares are outstanding, Those shareholders who stay should get a boost in per share value offsetting the amount spent. Though there’s always the hope that buybacks will be seen as an expression of confidence and the share price might go up, seldom is the market dumb enough to see a buyback as a reason to pay a premium more than the mathematical relationship between the old and new price.
“they are effectively pumping $40 billion into the US financial system”
What, by liquidating 40 billion of short term investments and using them to buy their own stock? They may be moving 40 billion around, but they’re not going to some secret Microsoft money bin and pulling out gold coins to pay for this.
“This is just a nice bunch of carrots for any unhappy investors”
As above, it has NO EFFECT for investors except having the effect of distributing cash as a long term capital gain rather than a dividend.
Too much cash sitting in the bank doesn’t help a company. Anyone can invest cash and get a modest return. You don’t have to own shares of Apple or Microsoft to do that. A company either needs to either find good business opportunities to invest it in or return excess cash to shareholders to invest elsewhere. The mechanisms to do that are dividends and share buybacks.
Liquidating short term investments and re-investing that in propping up a share price in a company that almost everyone with a pension owns would be a good thing in these uncertain times, Also the people they buy these shares off will either be able to reinvest in another stock (again helping the stock market) or even at a basic individual level will have cashflow to invest in consumer goods and services therefore helping the economy too
“Liquidating short term investments and re-investing that in propping up a share price in a company that almost everyone with a pension owns would be a good thing in these uncertain times”
In the context of the US stock markets, it would be like pissing in the ocean.
And as I said this does nothing to “Prop Up” the share price of anything. Any increase in the stock price due to just this action is due to the smaller number of shares outstanding, and is just an exchange for the cash used to make the repurchases.
If you could actually make shares of a company more valuable in excess of the amount you spent by repurchasing stock, don’t you think that there would exist companies who did nothing but issue stock then repurchase it? Wouldn’t every company do that to continually improve their stock price?
You sell your own shares, you buy your own shares; You give away hardware that will only run your software; You buy up all of the real competition (with one exception), and you park it in the back lot; You cheat – illegally, then obliquely pay off a few senators, pay a relatively tiny fine, and continue cheating – illegally…
I mean really: Is MS ever going to be put into a position where they have to conduct business by the same rules the rest of us do?
“I mean really: Is MS ever going to be put into a position where they have to conduct business by the same rules the rest of us do?”
The DOJ have made sure that already the rules are tighter for Microsoft.
If Apple had to play by the same rules Microsoft does it would:
1) Have to sell OS X software to all hardware manufacturers.
2) Open up the iPhone to all developers (no banning apps).
3) Allow people to license it’s proprietary protocols.
4) Publish all iPhone APIs used for Apple apps and make them available to everyone.
4) Make Safari an optional component of OS X.
Microsoft looks like the Free Software Foundation when put next to Apple.
“The company received corporate credit ratings of AAA and Aaa by Standard & Poor’s Rating Services and Moody’s”
Keep in mind that these are the credit ratings agencies that until recently rated subprime mortgage-backed securities as “AA” or “AAA”