Microsoft buybacks may total $75 billion
SEATTLE – Microsoft Corp. plans to pay out a substantial chunk of its cash hoard directly to shareholders through a combination of dividends and stock buybacks totaling up to $75 billion over four years, the software maker said Tuesday, ending speculation about what it planned to do with its billions in cash reserves.
The Redmond-based company said it would pay a one-time dividend of $3 per share and would double its annual dividend to 32 cents per share. Microsoft, which has amassed cash holdings of at least $56 billion, also said it plans to buy back up to $30 billion of the company’s stock over the next four years.
The buyback and dividends will not affect the company’s spending on new technology, executives said.
“We are going to continue to aggressively fund research and development and all the breakthroughs across all our businesses,” chief executive Steve Ballmer said in a conference call with journalists and analysts.
The one-time dividend is subject to shareholder approval of an amendment that would prevent employees who hold stock options or stock awards from being put at a disadvantage.
The concern is that the stock price will drop on the day of the payout, so the company wants permission to come up with a plan to make up for that loss.
If that plan is approved, the special dividend would be paid out Dec. 2 to shareholders of record on Nov. 17.
Curt Anderson, Microsoft’s senior director of investor relations, said the company had not yet worked out the details of how the massive cash buyback would work, or what the exact timing will be.
Microsoft had previously been hesitant to spend the billions it has been amassing because of fears the money would be needed for legal disputes. But the company said Tuesday that the large majority of its legal problems appear to be behind it.
Microsoft has settled many of its private antitrust claims, and it cleared its most significant U.S. legal hurdle when a federal appeals court unanimously approved the antitrust settlement the company negotiated about two years ago with the Bush administration. It still faces a lengthy court battle with the European Union, where it is appealing an antitrust ruling against it.
The payouts also come after Microsoft disclosed last month that it had initiated merger talks with German software maker SAP, but called off the potentially costly deal after deciding it would be too complex.
Over the last few years, Microsoft has become an extremely cash-rich company, adding $10.4 billion in cash during its 2003 fiscal year alone.
Microsoft is to report financial results for its 2004 fiscal year, which ended June 30, on Thursday.
The company said Tuesday that it continues to believe it has good prospects for growing its cash reserves, but it has not provided any specific guidance on cash flows.
Microsoft announced plans for its cash reserves after the close of markets. Shares of Microsoft closed up 37 cents at $28.32. In after-hours trading, shares surged more than 5 percent to $29.85.
Shares in Microsoft has been relatively flat in recent years, hovering roughly between $23 and $30 since April 2002.