Microsoft announced a $40 billion stock buyback plan and increased its dividend 22 per cent to reward shareholders as the firm undergoes a change in strategy and leadership. The repurchase scheme replaces another $40 billion buyback plan that was due to lapse at the end of this month, said the company yesterday. Microsoft's quarterly dividend will rise to 28 US cents a share, payable on December 12th to shareholders of record as of November 21st. At the end of the most recent quarter, Microsoft reported it had $77 billion in cash on its balance sheet. It also reported nearly $5 billion in net income in what was considered a disappointing quarter, bringing its full fiscal year earnings to $21.9 billion. The strength of its balance sheet and its earnings stream are among the reasons that the company is one of only four U.S. companies with the top AAA credit rating. Microsoft has also announced a $7.2 billion cash purchase of Nokia's (NOK) mobile phone business earlier this month.
The move is a step in the right direction for investors, though the open-ended schedule for the new buyback plan raises questions, said Matthew Hedberg, an analyst with RBC Capital Markets in Minneapolis. "What would be more interesting is if they put more parameters on the timing of the buyback, sooner is better than later."