Microsoft buys back $40 billion in shares, ups dividend, issues debt

Microsoft announced today a trifecta of initiatives intended to keep its investors happy and its cash

flowing. It will establish a new $40 billion stock buyback program over the next five years, having now completed a prior $40 billion buy-back. It has upped its dividend payout to 13 cents per share, an increase of 18 percent over the previous quarter's dividend. But most interestingly, the board has opted to increase its debt notes. Microsoft will issue its first ever commercial paper, with the board authorizing up to $2 billion in paper. (Commercial paper is short-term, large-sum notes, usually sold in increments of no less than $25,000 and coming due in 30 to 270 days.) In addition, Microsoft's board has authorized debt financings from time to time of up to $6 billion.

The Wall Street Journal points out that Microsoft's new notes come at a time when investors are looking for what they think will be safer alternatives to stocks during Wall Street's current crises. Microsoft's commercial paper have been stamped from the highest ratings from financial rating companies. Microsoft also notes that since 2003, it has returned $115 billion to investors in the form of stock repurchases and dividend payments.

The bloggers and investment boards are full of speculation as to what exactly Microsoft will be doing with the capital raised by its debt and the billions in company-owned stock. Many are again speculating that Microsoft will make another $40 billion run at Yahoo. Others suggest that Microsoft should not have committed so much of its resource to stock buybacks but should be buying up more young companies with promising technology.

Microsoft's moves, however, have bigger ramifications. Chris Liddell, chief financial officer of Microsoft, said in a statement that Microsoft's board wants to show investors that they believe Microsoft's long-term prospects remain great. Those looking for beacons in the stormy Wall Street weather can perhaps set their sites on Microsoft. This storm, too, shall pass and when it does companies with strong balance sheets will be sailing along, business as usual.

Visit the Microsoft Subnet home page for more news, blogs, podcasts.

More blog post from the Microsoft Subnet posts:

Bye-bye Jerry: Microsoft cancels Seinfeld ad campaign Top 5 strategies for surviving a recessionManage VMWare ESX 4 with PowerShellUnder the hood of Hyper-V (master list of links). 10 questions for Windows Mobile expert Mort Rosenthal Subscribe to all Microsoft Subnet Microsoft newsletter. (Click on News/Microsoft News Alert.)

Sign up for the

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.
Take IDG’s 2020 IT Salary Survey: You’ll provide important data and have a chance to win $500.