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Microsoft disbursing $75 billion
Owners of stock will get a one-time dividend of $3 per share; a big move to placate restless shareholders was expected.
BYRON ACOHIDO and ADAM SHELL
USA TODAY
SEATTLE - In what may be the biggest cash disbursement in history, Microsoft said yesterday that it will put an estimated $75 billion into the pockets of shareholders.
The software giant announced a one-time dividend of $3 a share. It also will buy back as much as $30 billion in shares and double its usual dividend over the next four years.
Microsoft Chairman Bill Gates, the company's largest shareholder with 1.1 billion shares, simultaneously announced he will pledge his estimated $3.3 billion one-time disbursement to charity through the Bill & Melinda Gates Foundation.
Gates is the world's richest man, with a net worth of $46 billion, according to Forbes magazine.
After moving aggressively in recent months to resolve several high-profile lawsuits, Microsoft was widely expected to make a big move to placate restive shareholders. Its cash hoard had grown steadily over the past two decades to $56.4 billion.
Microsoft began paying its first, small dividend 15 months ago. And with the company's annual sales growth slowing, its share price has remained largely flat for more than five years.
"It's good to give excess cash back to shareholders and let them do something with it," says Alan Davis, tech industry analyst at McAdams Wright Ragen.
By doubling its annual dividend to 32 cents a share, Microsoft will pay out $3.5 billion a year, which would put it at No. 10 on the Standard & Poor's 500 index's list of largest dividend payers, says S&P analyst Howard Silverblatt.
Add the one-time $3-a-share payout and Microsoft would be by far the biggest dividend payer.
Thanks to 2003 tax changes that lowered the top tax rate on dividends to 15 percent from 38.6 percent, Microsoft shareholders will pocket roughly $27.2 billion of the $32 billion one-time payout.
?With gripes about a bigger dividend put to rest, investors will now focus on whether Microsoft can continue to wring fresh sales and fat profit margins from its flagship Windows operating system and Office product suite, while nursing new businesses, such as its Xbox video game system.
The software giant also faces major security challenges. Windows PCs comprise 95 percent of the computers connected to the Internet and have become a favorite target of profit-minded attackers. Millions of compromised Windows PCs are being used to spread spam and viruses, and increasingly to do identity theft.
"The execution problems are still there," says Matt Rosoff, analyst at research firm Directions on Microsoft. "This lets them really focus on day-to-day business challenges and less on nagging financial questions."
Microsoft shares rose $1.49 to $29.81 in after-hours trading, after closing at $28.32 in New York. The stock price has been inching up in recent weeks as investors bet on a sweetened dividend package.
"We're confident we have in front of us great prospects to grow," CEO Steve Ballmer said in a press conference.
Owners of stock will get a one-time dividend of $3 per share; a big move to placate restless shareholders was expected.
BYRON ACOHIDO and ADAM SHELL
USA TODAY
SEATTLE - In what may be the biggest cash disbursement in history, Microsoft said yesterday that it will put an estimated $75 billion into the pockets of shareholders.
The software giant announced a one-time dividend of $3 a share. It also will buy back as much as $30 billion in shares and double its usual dividend over the next four years.
Microsoft Chairman Bill Gates, the company's largest shareholder with 1.1 billion shares, simultaneously announced he will pledge his estimated $3.3 billion one-time disbursement to charity through the Bill & Melinda Gates Foundation.
Gates is the world's richest man, with a net worth of $46 billion, according to Forbes magazine.
After moving aggressively in recent months to resolve several high-profile lawsuits, Microsoft was widely expected to make a big move to placate restive shareholders. Its cash hoard had grown steadily over the past two decades to $56.4 billion.
Microsoft began paying its first, small dividend 15 months ago. And with the company's annual sales growth slowing, its share price has remained largely flat for more than five years.
"It's good to give excess cash back to shareholders and let them do something with it," says Alan Davis, tech industry analyst at McAdams Wright Ragen.
By doubling its annual dividend to 32 cents a share, Microsoft will pay out $3.5 billion a year, which would put it at No. 10 on the Standard & Poor's 500 index's list of largest dividend payers, says S&P analyst Howard Silverblatt.
Add the one-time $3-a-share payout and Microsoft would be by far the biggest dividend payer.
Thanks to 2003 tax changes that lowered the top tax rate on dividends to 15 percent from 38.6 percent, Microsoft shareholders will pocket roughly $27.2 billion of the $32 billion one-time payout.
?With gripes about a bigger dividend put to rest, investors will now focus on whether Microsoft can continue to wring fresh sales and fat profit margins from its flagship Windows operating system and Office product suite, while nursing new businesses, such as its Xbox video game system.
The software giant also faces major security challenges. Windows PCs comprise 95 percent of the computers connected to the Internet and have become a favorite target of profit-minded attackers. Millions of compromised Windows PCs are being used to spread spam and viruses, and increasingly to do identity theft.
"The execution problems are still there," says Matt Rosoff, analyst at research firm Directions on Microsoft. "This lets them really focus on day-to-day business challenges and less on nagging financial questions."
Microsoft shares rose $1.49 to $29.81 in after-hours trading, after closing at $28.32 in New York. The stock price has been inching up in recent weeks as investors bet on a sweetened dividend package.
"We're confident we have in front of us great prospects to grow," CEO Steve Ballmer said in a press conference.