The news that Microsoft plans to pay $75 billion to its shareholders in the next four years excited the stockmarket Tuesday night and had commentators chattering this morning.
The Chicago Tribune's Bill Barnhart wrote about what this could mean for other companies:
Drake Johnstone, an analyst at Davenport & Co. who tracks Microsoft, said the company can easily afford the payout without impairing its balance sheet or hampering future growth.The news could have broader implications, he added.
"Certainly, this may put pressure on other companies that generate substantial free cash," Johnstone said, mentioning semiconductor-maker Intel as a prime example. "One would think that shareholders would start agitating."
Among those expected to benefit from the move are mutual fund companies such as Fidelity Investments and Pioneer Investment Management Inc. as well as retail merchants who like the Dec. 2 timing of the dividend disbursement.
It's also interesting to take a look back at Microsoft's decision to issue its first dividend ever, in January 2003. Back then, BusinessWeek wrote:
Gates and Ballmer are as paranoid about threats to their business as they come, and they've always rationalized the cash hoard, which now tops $43 billion, as a cushion against rivals. It gives Microsoft the ability to make multibillion investments and acquisitions without batting an eye.[snip]
So why the reversal? Mostly because the cash hoard simply got too big.
As might be expected, the Seattle Post-Intelligencer has been all over the story. The latest news, including the results of a P-I poll on what Microsoft should do with its money, can be found at the paper's Microsoft blog.
Posted by tgibbons at July 21, 2004 03:54 PM