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Sat, Jul 19, 2003 - Page 12 News List

Microsoft won't bow to investors

A LITTLE PATIENCE Microsoft says it will not raise dividend payments from the current US$0.08 per share, because it needs to maintain ready cash if it loses pending lawsuits

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Microsoft Corp chief financial officer John Connors said the world's biggest software maker won't bow to pressure from investors to boost its US$0.08 dividend, saying the company may need the money if it loses the remaining antitrust lawsuits.

"We hear the angst of shareholders, and we are mindful of it," Connors said in an interview late yesterday. "We are hopeful we'll get a little patience from investors."

Microsoft has US$49 billion in cash, and share owners say Connors and chief executive Steve Ballmer haven't used the stockpile to boost their returns. The Redmond, Washington-based company's shares have fallen in two of the past three years, as sales growth slowed to 13 percent in the year ended June 30 from an average of 38 percent annually in the 1990s.

The company won't raise the payout until it can put a dollar value on the impact of cases filed by Sun Microsystems Inc and the EU, Connors said. An increase wouldn't be "prudent" until those cases are resolved, he said.

Microsoft generated more than US$10 billion in cash last fiscal year. Tripling the dividend would cost Microsoft less than the amount of cash the company raised in the last quarter alone.

The EU could impose a fine of as much as 10 percent of Microsoft's revenue, or US$3.2 billion. Sun is seeking more than US$1 billion in its antitrust lawsuit in US District Court in Maryland.

That argument "doesn't make sense," said Mark Herskovitz, who manages the Dreyfus Premier Technology Growth Fund and has been selling some of its Microsoft shares. Dreyfus controls more than US$180 billion.

"The company has plenty of cash, and if they were really worried about the potential of having to pay a fine or something, it would be better to distribute to shareholders so other people can't get it," he said.

Microsoft reported a 26 percent increase in its fourth-quarter profit and raised its outlook for the coming year Thursday. The company's fourth-quarter net income rose to US$1.92 billion, or US$0.18 a share, from US$1.53 billion, or a US$0.14, a year earlier, the company said. Sales climbed 11 percent to US$8.07 billion.

The software maker paid out US$857 million on the annual dividend last fiscal year. That was 8.6 percent of its US$9.99 billion in net income. The yield, at 0.29 percent, is the lowest in the Dow Jones Industrial Average.

Chairman Bill Gates received more than US$90 million last year in dividends, and Ballmer got about US$38 million.

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