Microsoft Declares Dividend, Warns

Microsoft announced a surprise dividend and stock split after the close on Thursday, but the software giant also missed revenue estimates and warned. IBM and eBay delivered better than expected results.

Stocks struggled during the day on the growing specter of war with Iraq, as UN inspectors found empty chemical warheads.

The Nasdaq fell 14 to 1424, the S&P 500 lost 3 to 914, and the Dow declined 24 to 8698. Volume rose to 1.49 billion shares on the NYSE, but declined to 1.57 billion on the Nasdaq. Advancers led 17-15 on the NYSE, but decliners led 17-14 on the Nasdaq. Downside volume was 56% on the NYSE, and 77% on the Nasdaq. New highs-new lows were 109-10 on the NYSE, and 77-27 on the Nasdaq.

In a move that could force other cash-rich tech stocks to follow suit, Microsoft announced a surprise 16-cent annual dividend after the close, along with a 2-for-1 stock split. Elimination of the tax on dividends is one of the centerpieces of the Administration’s economic stimulus package, which has fueled speculation that tech stocks may begin paying dividends. Elimination of the tax could also mean an estimated $100 million a year in tax-free income for Microsoft Chairman Bill Gates. Microsoft’s earnings of 47 cents a share beat estimates by a penny, but revenues of $8.54 billion were light of $8.61 billion consensus, and the company guided March and full-year revenues lower by $200-$600 million. The stock fell 2 points in after hours trading after initially popping on the dividend and stock split news. Microsoft said UNIX server sales were particularly weak.

Also after the close, eBay beat estimates and raised guidance, and IBM topped revenue and earnings forecasts and maintained guidance for 9%-10% growth, dependent on modest growth in IT spending. Sun also beat estimates, as did Juniper and Scientific Atlanta . AMD missed estimates.

During the day, a judge gave Microsoft 120 days to add Java to Windows.

Symantec rose 3.2% on better than expected results and guidance.

But Yahoo , off 4.3%, and QLogic , down 8.9%, fell despite better than expected results and in-line guidance.

Apple gained 1.5% on in-line results. Netflix slipped 1% despite better than expected results. Redback plunged 26% on in-line results and news of a restructuring.

Register.com gained 2.1% after rejecting a takeover offer. NextLevel is weighing Motorola’s buyout offer.

Lucent , off 2.3%, won a broadband deal with Bell Canada.

Overture , down 4%, is acquiring a Web analytics firm.

Mercury Computer gained 12.5% on better than expected results.

Research In Motion will sell its BlackBerry products in Spain.

WebEx , down 1.2%, is eyeing enterprise customers.

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