Microsoft Considers $10 Billion Dividend

Dreadnougat writes "Microsoft is considering paying out a $10 billion dividend, the largest corporate payout ever. Cynics (ok, anyone reading /.) might note that Bill Gates stands to make $1.18 billion himself off the $1 a share dividend, in comparison to the $95 million he makes in a normal year off the regular 8 cents a share dividend."

Comments

Microsoft vs. Sun

[darnok]

There was an interview with Scott McNealy in one of the Linux magazines a few months back. In it, he said (paraphrasing) "if Sun ever pays out a sizeable dividend, it means we've run out of R&D ideas and the company's in trouble". I don't remember the exact wording, but that's the gist of it.

Essentially, Sun's policy is to reinvest all profits back into the company. Putting it another way, they're banking on being able to keep growing the company indefinitely and thus keeping shareholders happy solely through upward movement in the share price.

It seems that this may have been Microsoft's policy as well until now. Conspiracy theories aside, it'd be interesting to know what changed to make them issue a big dividend after all these years.

Re:Microsoft vs. Sun

[darnok]

They *could* use huge chunks of that to buy out other companies.

On a flight yesterday, I was reading about a meeting at Ford UK several years ago where they were trying to work out how to invest their huge wad of cash at the time. One of the suggestions that was raised was to buy a company called NCP (National Car Parks) in its entirety. NCP is/was the largest owner/operator of car parks in city areas in the UK.

Once Ford owned NCP, they could then either charge a premium for non-Ford car owners to park their cars there, offer much cheaper parking for Ford cars, or prevent non-Ford cars from parking there altogether. The thinking was that, as the primary value of a car for many people included the ability to park it somewhere in the city, this would encourage people to purchase their next car from Ford.

I'm not sure what the anti-monopoly laws are like in the UK, but given straight supply/demand drives the costs for parking in privately-owned car parks and alternative car parks do exist (albeit with probably not enough capacity to accept every non-Ford car), it might have been very difficult to stop Ford from doing this, or new laws might have needed to have been drafted specifically to prevent it. If necessary, Ford could potentially have offered ridiculously low costs for Ford-only parking at NCP, run NCP at a huge loss, and still made a bucket load on increased car sales.

For whatever reason, Ford didn't buy NCP so anything else is speculation.

Anyway, coming back to the point, there are valid D ("development") uses for absurd quantities of money such as this, and I'm sure MS would consider zillions of options for business growth before giving away such a huge stash.

Interesting development

[Pettifogger]

Hmmm... anyone wonder why Microsoft is really doing this? No, it's not Gates' greed; he has enough and he knows it. This is a plan to ensure the long-term stability of the company. Linux is starting to get more press and is being increasing seen as a viable alternative. I think this is a strategy to increase investor confidence and tie the company's financial rewards more to the public. Everyone knows what the profit margin is on their products and that the corporation itself keeps almost all of that. I think this is a subtle way of saying that they're going to start sharing their big income.

And consider this: a lot of companies, institutions, foundations, trusts, etc. regularly buy securities for endowments and other investment purposes. Now, if Microsoft stock is a good performer, it would give Microsoft an "in" with those companies and institutions for software sales.

No matter what you think of Microsoft (and for the record, I do not have a single Microsoft product under my roof) this is a smart business move. And I might add that Linux cannot compete on these grounds, either. Smart move... seriously.

Who Said $1 Per Share?

[reallocate]

Where'd that "$1 per share" stuff come from? All the reports I've seen today speculate about an increase from 8 to 26 cents per share, max.

But then, Slashdot could only troll about Gates taking 2 billion, not 10 billion. I'm sure it was just an editorial typo. Heh.

Need to Pump Up Stock Price

[virtigex]

The biggest problem that Microsoft has to deal with is their langusihing stock price. When the stock stalled in in 2000 many people left, because there was no more money to be made from the stock options.

Microsoft is made up of a load of long-timers who have made enough money through stock options that they don't really have to work and the newcomers whose stock options have been underwater for several years.

Without stock options (and the money generated with a rising stock price) neither the money or the work environment is much to write home about. Neither the old-timers or newcomers are particularly motivated and most of the "innovation" goes on by buying smaller companies.

Issuing a dividend is one way to pump the stock price up and thus motivate some employees.