Microsoft Said to be Mulling $10B Dividend

Microsoft stock has been climbing in morning trading
Monday following a report in the Financial Times that the software
giant is considering the idea of granting its shareholders a one-time, $10
billion cash dividend.

Microsoft’s share price was up 3.6 percent to $27.45 in late morning
trading Monday, following the Financial Times story, which cited the
paper’s French sister publication, Les Echos.

The idea comes as shareholders continue to complain that the annual cash
dividend Microsoft initiated in January, is a paltry sum when compared to the company’s $46 billion
war chest and its annual cash flow of nearly $13 billion. The company
offers a dividend of 8 cents per share, about $850 million a year, or a
yield of less than 0.5 percent.

“Declaring a dividend demonstrates the board’s confidence in the company’s
long-term growth opportunities and financial strength,” John Connors,
Microsoft’s chief financial officer, said when announcing the 8 cent per
share dividend in January. “We are especially pleased to be able to return
profits to our shareholders, while maintaining our significant research and
development efforts and satisfying our long-term capital requirements.”

He added, “This is a significant step for Microsoft and we’re pleased to be
able to make this step while continuing to make very broad and deep
investments in research, sales and marketing.”

At the time, Connors characterized the dividend as a “starter dividend.”

“In looking at the dividend we looked at Dow 30 companies, we looked at
other tech companies and we feel that what will be over $850 million for
our first dividend is a significant amount of money and a meaningful
dividend,” he said. “As we go forward, we’ll look at what our legal
environment and risk profile will look like. What does R&D look like. What
do significant other uses of cash look like. And then we’ll review the
dividend ballpark. It’s a good place to start.”

Connors also told analysts that the company had no intention on changing
its stance on stock buy-back as a result of the dividend, noting that it
continue to be a “large purchaser of our stock.”

He added, “In addition, we do have the goal of managing dilution and will
use the buy-back for that.”

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