I don't like the sound of this . I would much prefer that they invest the cash the next time something big opens up in the tech sector . I think i might sell.
There is an Accumulated Earnings Tax of almost 37% that the IRS can impose on a corporation which accumulates earnings "in excess of the reasonable needs of the business." Who decides? The IRS does. Then they go to court. If the IRS wins, they give the corporation a 37% haircut.
It may be that Microsoft's tax accountants are warning them that they are getting into the territory where the IRS might win one of these judgements. The way to avoid it is to pay some of the cash out as dividends, which exposes it to taxation, which is what the IRS is after.
There is a double tax-whammy here from the IRS. IIRC, a "special dividend" gets subtracted from your basis in the stock when calculating a capital gain or loss. This might be a nit to the average investor, but to the IRS is looks like billions more.