Microsoft Announces Dividend and Stock Buyback Program

neile writes "Microsoft just announced some of their plans for their large cash reserves. This includes moving to quarterly dividend payments of $0.08 a share (up from $0.16 annually), and a special one-time dividend of $3.00 a share in December. The Board of Directors also approved a four-year, $30 billion, stock buyback plan."

Comments

Outstanding

[PhreakinPenguin]

I knew I bought their stock for a reason. I know I will get modded down for this or flamed but you'll never see a company like Redhat do this. Regardless of your opinion of MS, this is a good move to reward stockholders.

Re:Outstanding

[Moofie]

So you think that buying stock in an unethical company is ethically neutral?

I think you're wrong.

Re:Outstanding

[tux_deamon]

No, most tech companies don't pay dividends, rather they reinvest their profits (would they ever see them) into R&D. Most tech shareholders bank on the speculation that the share value will increase as the company grows very quickly.

Paying a dividend is usally something only mature companies do when growth slows down. Microsoft is one of the few tech companies that pays a large dividend.

Re:Outstanding

[tux_deamon]

Well, there are mutual funds dedicated to investing in socially conscious/socially responsible corporations. Your bank/investment advisor can probably give you some more information.

But here's a directory worth looking at

Interestingly, one of the pioneers of the movement is US VP Candidate Peter Camejo.

The general idea is to invest in companies with good track records in the areas of human rights, labor, business ethics, the environment, etc.

Re:Outstanding

[Farce Pest]

A lot.

Bill Gates directly owns 1.12 billion shares (that's 1.12e9), and indirectly owns 428K shares, so his cash dividend will be somewhere between $3.36 and 4.64 billion.

There are only (yeah, only) 10.8 billion shares outstanding, so overall this is a $32 billion dividend.

I have to wonder if Bill plans to buy a country and retire there. I just hope it isn't the US.

Re:Outstanding

[hazem]

I agree it's a weak example. But slavery is not my point. I probably shouldn't have picked on Walmart either.

The point I'm trying to make is that companies will only be as ethical as the people they are accountable to. That is the government, shareholders, and customers. As a group, the customers have the most strength, but not so much as individuals.

The government has the strongest effect as an entity, as it has the force of law. But it also sets a pretty low bar for ethical behavior.

The shareholders may be able to vote, but individual members have little effect unless they own a lot of shares. Those with ethical concerns about the company probably will chose to sell their shares if they don't have a strong enough voice for change.

Customers as a group have a strong effect on the ethical behavior of the company, even though individual costomers have little effect at all. En masse, the customers can compel a company to change its operations and strive to be more ethical. Look at how Nike is working to improve conditions in the factories it contracts with. Everyone I know at Nike are nice people, but I imagine that things would not have changed without the large outcry from customers.

So, while using slavery as an example was not a solid way to make my point, I think the point is still valid.

As long as the customers don't care how they get a good deal, then the companies that sell them their products have little ethical incentive to make a change. Without an industry-wide push for ethics, then a company striving for more tethical behavior will be undercut by its less ethical competitors. Only with a large enough customer base that values ethics can a company be more ethical than its competitors and survive in the long term.

But ultimately, if the customers, as a group, chose to purchase from companies who act in unethical ways, then they too are complicit in the unethical behavior. Many chose to simply remain ignorant than have to make difficult decisions that mean they may have to pay more for less-tainted/taint-free products.

But, please don't paint me as a radical. I choose not to identify with any political party and strive to take positions based on the facts I can find, on each issue I'm faced with. I find, though, that I tend towards the libertarian, but I also believe there are certain economic truths that make certain social programs desirable.

For example, suppose you have a lot of unemployed people. You can:
1) ignore them
2) give them money (welfare)
3) invest in their eduction and the economy to build new jobs
4) kick them out of town/state/country
5) simply kill them

Each, though, has a cost:
1) they will probably turn to crime. You now have paid in whatever they have damaged, and in the costs to prosecute and put them in prison. Property values probably go down too.
2) costs are self-evident
3) costs are self-evident
4) you have to pay to transport them and set up a guard-force to keep them out
5) executioner costs, and difficult to measure costs in the impact on the moral fiber of the community

In all 4 cases there is a cost to bear. It's a matter of picking the one that has the least cost and is most just. So, for me, I'd lean towards 3.

Now I'm way off-topic!

Got to be a catch in their someplace

[Marxist Hacker 42]

Oh yeah- the catch is Bill Gates Sr. He's always taught his son that vast accumulation of wealth was bad for the economy overall. The one redeeming factor of the Gates family has always been small estates (for the socioeconomic class they're in anyway- MY parents can't afford to give me a $100,000 loan to drop out of college and start a business). Maybe Bill Gates Jr. finally convinced his board what his father always taught him.

Re:Got to be a catch in their someplace

[blackmonday]

His dad's a real interesting guy. He's a big supporter of inheritance taxes. if I remember correctly, he believes society got you where you are, so you need to give back when you go away.

Well, good.

[scowling]

It doesn't make sense (to me) for a company to sit on top of massive cash reserves which represent, essentially, profit made by from the investment of stock buyers.

But on the other hand, it wouldn't make sense for them to blow all of their reserves on dividends and buybacks. After all, not even Microsoft could be so arrogant as to blithely assume that they're going to keep making the kinds of profits they have been until the end of time.

Um. Never mind.

Panic!

[nzgeek]

Man, I knew MS were worried about their lacklustre share price performance compared to Apple, but this is a desperation move if ever I've seen one.

Basically, this is a quick way to pump up your share price by almost three bucks, only to have it plummet by the same amount when it goes ex-dividend.

Either that, or they are trying to lose that cash-mountain to make it less of a target for something over the horizon that we haven't seen yet. Think patent infringement lawsuit or something like that.

Who owns the bought-back stock.

[Flat Feet Pete]

So does a buy back program mean that msft is buying shares in msft? This seems a bit odd as it creates a circular loop in the owenership. I own 0.0001% of msft, but that 0.0001% of msft owns 0.00000001% of msft.

I understand that this is mainly to drive up stock prices, but could a company theoretically own itself. This stuff's confused me for a while.

Won't affect current reserves.

[BigGar']

I was thinking that I'd read that Microsoft was cleaning about 1 billion per month. If that's accurate and continues the stock buy back would not affect cuurent cash reserves only slow the rate it builds. That would result in a reserve growth of 18 billion over the next 4 years instead of 48 billion, while at the same time reducing the number of publicly held shares which will probably up the stock price.

Well it makes me happy

[tekunokurato]

I just won $100! I bet my buddy that they couldn't come up with a better investment than a direct financial return to stockholders, and I was right (he thought they were going to buy somebody big). The bet's been going since late winter when they announced they'd have a plan for their cash by mid-summer.

It really is a reflection of their growth prospects. Until now their stock value was still banking on a good deal of growth, and this announcement makes it clear that they probably won't achieve that.

Actually, an interesting stat is that something like only 15% of stock buyback approvals in major companies actually materialize into actual buybacks.

Dividend tax law

[Anonymous Coward]

So basically since the dividend tax changed, microsoft is giving all its money away. Has to make you wonder especially since Bill and crew will get a lot of cash with minimal taxes now. Conspiracy hat engaged: Big business tells Bush Administration, our companies have lots of cash and we want it since we have lots of shares in said company that has lots of cash. Change tax law and then we can divest the companies of the cash and put it in our own pockets. Sure some small investors will get some money too but they don't own 23% of said company like I do, boo-yaa.

Re:Discounts court cases and Linux

[jmorris42]

> This basically says the future looks bright ahead.

No it doesn't. I'd say it is a combination of many of the reasons already discussed and one that hasn't

1. MSFT stock has been dead in the water for several years.

2. Microsoft is transitioning from growth stock to stable megacorp.

3. But my fav is this line of reasoning. It is a forgone conclusion that sooner or later a major destructive Outlook/IE worm is coming. Something along the lines of a Warhol worm with a destructive payload. If a script kiddie doesn't do it Al Queda will. On that day, a $60B cash horde goes from a club to threaten competitors with to a siren call for trial lawyers that hasn't been heard since the heyday of the tobacco lawsuits. Imagine the Fortune 500 (ok, 499) joining into a Class for the mother of all class action lawsuits.

Re:No doubt about it

[NanoGator]

" Have you considered that they've strong-armed OEMs for years to include nothing but Windows?"

They didn't strong-arm enough OEMs to make a monopoly out of it. Hence the ruling that they were guilty of trying to maintain the monopoly, but not in initally creating it. I guess few people remember the massive explosion of computers sold back in 95 shortly after the Windows 95 hype reached its climax.