Microsoft Shares

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Category: Shares Types

In a historic moment at a company renowned for stockpiling huge sums of money, Microsoft Corp. yesterday announced a four-year, $75 billion plan to reduce its cash holdings by repurchasing billions of dollars in stock, increasing its dividend and making a huge, one-time payout to its shareholders. All told, it will be the largest amount of capital ever returned to investors by a U.S. company. Microsoft executives said the decision grew out of their confidence in the company's long-term prospects, and the ability to resolve many of their legal challenges during the past year.

Microsoft's cash balance has grown steadily over the past decade, topping $56 billion at the end of March. A federal appeals court ruling last month, upholding Microsoft's landmark U.S. antitrust settlement, resolved the last major impediment to reducing the balance. His is such a spectacular amount of money. It's something we've never seen in history to this magnitude," said Don Gher, chief investment officer with Bellevue-based Cold stream Capital Management, which manages about $550 million, including significant holdings in Microsoft.

In September, the company will start issuing a quarterly dividend of 8 cents per share, effectively doubling its existing annual dividend of 16 cents per share. Finally, over the next four years, the company plans to buy back as much as $30 billion worth of its stock. By reducing the number of shares outstanding in the market, buyback programs increase a company's earnings per share and tend to boost its stock price Microsoft's shareholder base includes a large number of the company's employees, who receive and buy shares through their benefits and compensation packages. More than 27,000 of the company's 56,000 employees are in the Puget Sound area.

Microsoft would pay its one-time dividend of $3 per share at the beginning of December, during the holiday shopping season. But the payout won't likely affect consumer spending, said Scott Smallman, senior vice president at Piper Jaffray in Seattle."Realistically, it probably doesn't have an enormous impact at Christmas," he said. "A lot of the holders of Microsoft are institutional, and they're not going to go out and buy Christmas presents."