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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.
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.
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.
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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!
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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, however, you're not sure whether President Bush will continue to tax long-term capital gains and qualified dividends at 15%, or President Kerry will demand that Congress undo the tax cuts, resulting in marginal tax rates on long-term capital gains of 20%, and all dividents at up to 39%, blowing some of those reserves on one-time dividends and buybacks over the next 12 months is a pretty good idea.
Google for "special dividends", and you'll see that a lot of companies are doing this sort of thing (one-time "special" dividends of 5-10%, rather than merely raising their dividend by a few cents per share indefinitely) these days. You'll also notice that the trend started in the past six months -- right about the time people realized that the election is shaping up to be a statistical dead heat.
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
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.