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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."
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.
My sig of choice is Marlboro
Crap, I was hoping for a Mars mission.
Blaze a trail to the New World
"... and all seven of our businesses are growing," said Steve Ballmer
Seven businesses? Can anyone enlighten me on this? OS, Software, Xbox, MSN, selling hotmail addresses to spammers?
Caesar si viveret, ad remum dareris.
Pay attention to the Forward Looking Statement..
"the availability of competitive products or services such as the Linux operating system at prices below our prices or for no charge; "
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.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
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.
www.kitchengeek.com -- Nosh for
These are the actions of a company that realizes they are no longer a growth stock and is no longer looking to finance things via the market but rather reward consistent investors and enter into a "slow, continuous growth" mode instead of acting like a start-up. Investors will like quarterly dividends and the buyback will shore up the flagging stock price.
Now, if only Cisco would buyback their stock (way too many shares floating), start expensing their options like a proper company and start paying some dividends, maybe they could be considered a grown-up stock as well.
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.
gadgetophile.com
Microsoft is great at one thing; making money. Unfortunately, being good at making money doesn't necessarily mean they have to be good at making software (at least considering how they've gone about it).
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.
Shop smart, Shop S-Mart.
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.
Read jack phelps dot net
It has the same effect as if the stock was bought back then the shares canceled. If I own 25% of MSFT, and MSFT buys back half of its outstanding stock from other people, I now own 50% of MSFT. I say "in effect" it's canceled because depending on where MSFT is incorporated, it may "hold" this stock as "treasury stock" so it can resell it later without "issuing" new stock. If it does not hold treasury stock, the stock is "canceled" and will have to be re-issued if MSFT wants to "sell" it.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
There is no feedback loop. They buy back your shares, you no longer own them, so yes MSFT owns another 0.0001% of itself.
Yes, a company could theoretically own itself. Much like a million and one Mom-and-Pop corner stores own themselves.
The sharemarket exists as a way to distribute risk. A long time ago (in a galaxy fa...) MSFT said: "Hey we have this great idea to make software to sell to computer users, and we need money to do it. Rather than take out a bank loan, how about you guys (Mr and Mrs Mutual Fund Owner) shoulder some of the risk? If it works out, we'll both make lots of money!"
If MSFT happens to make so much money that they can afford to buy the risk back from Mr and Mrs Shareholder, then more power to them. This is not the way it happens in reality though, because the risk always exists, and if MSFT happens to go down the toilet, they don't want to shoulder the entire burden. Better that Mom & Pop Shareholder take some of the pain too.
Strange isn't it that most Fund Managers and Brokers never ever mention the 'Risk' part of the equation eh? They always talk about 'equity' and 'investment'.
I'll say it again: the sharemarket is simply a way of distributing business risk. If you can't take the risk, invest in fixed income. Not as sexy and not as much possible upside, but not as much risk.
gadgetophile.com
seriously how many /.actually have MS stock.
There is a very good chance that anyone with mutual fund investments in growth funds that deal in mid-to-large-cap stocks will own a bit of Microsoft. Since I'm guessing there are quite a few people who are gainfully employed reading Slashdot that are probably younger, probably have a 401k, and probably are choosing longer-term investment options to grow their money, I would bet a significant percentage of (the gainfully employed) Slashdotters own a chunk of Microsoft, whether they realize it or not.
I can't give you exact figures, but I know that I indirectly own a little chunk of Microsoft and I'm guessing a lot of other people here do too.
Free yourself. Everything else will follow.
Hey, why don't they pay out that promised money for forwarding all those emails to Bill could test that email tracking software? I mean, I musta sent that thing to several hundred people expecting to reap big cash rewards and I haven't even seen a dime!
--
As a matter of fact, I am a lawyer. But I play an actor on TV.
Huh? Most public companies take their profits and reinvest them in the company. This may or may not help the company grow and reward investors by making the company more valuable. Some companies pay out dividends (i.e. pay out profits to investors), usually because the company is not easily able to expand so growth is not an option. This is commonly seen in large companies in mature fields; think heavy industry, mining, railways, etc..
Redhat most definately does not give their profits to their investors; they are focused, like most tech companies, on growth, so they reinvest it in the company.
If MSFT buys back shares, then some people who once had shares have cash instead and the remaining people own a bigger fraction of the company. It's like some of the owners of a partnership allowing another partner to cash out, paying her off from the assets of the business.
Sustainability and energy independence essay
This is great news for Microsoft. It means it's going to keep focused on its current businesses and not do any big crazy move like buying SAP, Disney, Sun or something stupid like that.
Most boards with that much money at their disposal would be tempted to get themselves on the headlines but the Microsoft leadership has always been sensible.
This seems like just a way to make the stock price rise. Someone correct me if I'm wrong, but:
1. Give away a big one time dividend (stock is immeidately worth that much more/share).
2. Buy back your shares, increasing demand for them, thus increasing the value.
3. Buy back your shares, creating less total shares (since I'd assume the shares would no longer be outstading shares and not traded), thus increasing the value of each share.
It's interesting, but kinda weird. As another poster said, they couldn't figure out what else to do with the big pile of money they had sitting around.
AccountKiller
Charitable donation does NOT absolve you of paying tax on the income you donated.
That's not quite right. When you donate an amount of money to a charity you are absolved of all tax on that amount. However, your total tax savings are only equivalent to your marginal tax rate.
In other words, when you donate $100,000 (say) to charity, and your marginal interest rate is 17%, you save $17,000 in taxes but you're still out the $100,000 you donated so you have an effective loss of $83,000.
Mmmm.. Donuts
> 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.
Democrat delenda est
This move was not entirely unexpected, you always give the investors' money back to them if you can't find anything better to do with it. Microsoft has always been an extremely disciplined purchaser of companies (you know what I mean if you've been f****d by them). What this is saying is that there are no really good opportunities at MSFT's current scale. It also means, if you're paying attention, that the center of gravity of tech investment (eventually becoming innovation) is moving elsewhere... FOSS is driving a secular change in our industry.
Historically, MOST large companies (eg, those in the S&P 500) regardless of industry pay a dividend on the order of 4% per year. Earlier in the 20th century, dividends averaged as high as 6-7%. Recently the average has dropped to 2-3%, which is a historical low. The tech companies that have gotten so big so fast in the last 20 years and still pay a tiny dividend are an exception, not the rule. Those companies have now reached a scale where it is unrealistic to expect them to be high-growth businesses (on a percentage basis), and are struggling to adjust to the fact that they are now "mature" firms.
Microsoft seems to be making the adjustment somewhat more quickly than the other new tech giants. Realizing that rapid share price appreciation was probably gone for good, they quit issuing options to the employees and now give limited stock grants. Realizing that they have pissed off a lot of shareholders by accumulating $60B in cash that they can't seem to use, they are issuing the one-time special dividend and increasing their annual dividend (although it will still be on the order of only 1%). I suspect that the stock buy-back is aimed more at trying to increase the share price for those thousands of disgruntled employees holding worthless options than anything else -- buying shares is no better "investment" than using the money internally, something they don't seem to be able to do, but it does have financial effects.
In theory, yes, but only in theory. A share in a corporation represents fractional ownership, but an individual shareholder can't exchange his share for that fraction of company assets. The best he could do is vote for directors who promise to auction off the company and give the proceeds to shareholders; it's quite rare that a publically traded company goes through that.
In practice, that share has monetary value because of two possibilities:
1) The company will distribute a portion of its profits as dividends. You own a fraction of the company, so you get a fraction of the profits. Just like owning your own company, but without the hassles of sole proprietorship.
2a) Someone else will buy the share from you. Now, this someone else is motivated by possibility #1, perhaps in the distant future
OR
2b) In principle, even if dividends were not being paid, a person or corporation with enough resources could buy a majority of the shares and either begin paying dividends, OR, take the company private or as a subsidiary, and take the profits or liquidate assets that way.
2B is usually just a theoretical floor to a stock's value when the possibility of dividends is still remote. I.e., why a "growth" company losing tons of money doesn't immediately go to zero stock price. In a bull market, the price is kept up by 2A, otherwise known as the "greater fool theory."
Yes, a company could theoretically own itself. Much like a million and one Mom-and-Pop corner stores own themselves.
That is complete and utter nonsense. Buying back stock means that the value of the company and the number of investors is reduced, but the investors that remain still own the entire company. Let's give an example:
5 equivalent stocks are out there. The company is worth 5 million, so each stock is worth 1 million. The company now buys back 4 stocks for 4 million. The result is that the remaining stock is now worth the same as the company: 1 million. The company could buy back the last stock as well, but only by liquidating (selling all assets, thus going out of business). Another possibility is that the people who run the company use their own money to buy the remaining stocks, which would make them owners just like a Mom-and-Pop corner store. However, even then the company doesn't 'own itself', it just happens to be that the owners also run the company.
If MSFT happens to make so much money that they can afford to buy the risk back from Mr and Mrs Shareholder, then more power to them.
The reason that they are giving one-time dividends and buying back stock is actually that they make too little money. Let me explain: In the world of money, ROI is everything. Making 1 million on an investment of 1 million is good, making that same amount after investing 1 billion is not so good. Now, if a company has earned a lot of money in the past, but can't use this money to generate new profits, the value of the company becomes less and less. The stock is worth a lot (because of all the money in the company's coffers), but the profit is marginal. This makes investors very unhappy (unless the stock is increasing in value, but that is no longer a given for MS, since they are transforming from a growth stock to an income stock).
A way to fix this is to simply give the money to investors (one-time dividends). This effectively decreases the value of the company, resulting in a better profit per invested dollar (but not per share). A second possibility is to buy back stocks. This is very similar to a one-time dividend, since company money is given back to investors. However, the dividend per stock also increases, raising the value of stocks. Some more info on the advantages and disadvantages of stock buybacks.