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Thu, Jul 22, 2004 - Page 12 News List

Microsoft gives back US$75 bn to shareholders

FOUR-YEAR PAYOUT The software giant will use up its cash reservers by buying its own stock, double its dividend and paying a special dividend


Microsoft Corp, the world's No. 1 software maker, said on Tuesday it plans to return more than US$75 billion in cash to shareholders over the next four years in the largest corporate payout ever.

Shares in the Redmond, Washington-based company rose 5 percent in after-hours trade following Microsoft's announcement that it planned to buy its own stock, double its dividend and issue a special one-time dividend.

Microsoft, which generates about US$1 billion in cash per month, said it would still have sufficient funding for research and to make acquisitions.

Microsoft has been under mounting pressure from investors to return cash to shareholders as its sales growth has slowed, its share price has stalled and it has successfully settled major legal disputes with governments and competitors.

"I think they are being good stewards of capital, returning the money if they do not have a better way to invest the money themselves," said Nancy Barber, a fund manager at US Bancorp Asset Management, which owns Microsoft stock.

"In this market, a US$30-billion dividend -- who won't take it? I think people are pleased but it is largely anticipated," she said.

By pledging to return US$75 billion in cash -- equal to what US President George W. Bush requested to fight the war in Iraq -- over the next four years, Microsoft effectively will use up all of its cash reserves, expected to top US$60 billion in the just-ended quarter.

Analysts say they believe Microsoft has more than US$70 billion in liquid assets, including investments in other companies.

In addition, as Microsoft increasingly draws on a steady stream of revenue from software sales booked far in advance, the company generates free cash flow of about US$12 billion per year.

Analysts say that these are all signs of a company entering a more mature stage with slower growth rates. But chief executive Steve Ballmer, who issued a note three weeks ago calling for greater cost controls, disagreed.

"I think of us as very much in a phase of great opportunity and growth," Ballmer told reporters and analysts.

Microsoft's board of directors approved a quarterly dividend of US$0.08 per share, effectively doubling the current US$0.16 per share annual dividend. Microsoft will also buy up to US$30 billion of its own stock over the next four years.

The board also approved a one-time special dividend of US$3 per share, subject to shareholder approval at the annual meeting in November.

Shareholder approval for the special dividend is needed in order to make changes to Microsoft's stock-based compensation plan, since the company plans adjust the stock option and award amounts for employees who will see their share values drop once the special dividend is issued on Dec. 2. The dividend is payable to shareholders of record on Nov. 17.

Company chairman Bill Gates, said that he would be giving his estimated US$3 billion payout to his charitable trust.

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