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FT: Microsoft considers $10bn shareholder payout
Financial Times via CBSMW ^ | 7/3/2003 | FT

Posted on 07/03/2003 4:35:44 PM PDT by mikegi

Microsoft is considering paying its shareholders a special dividend of more than $10bn to reduce its $46bn cash pile. Shareholders would receive the dividend in a one payment of "significantly more than $10bn" or spread over three or four quarters, according to a person close to the discussions. The dividend, which would be the largest corporate pay-out ever, is one of a number options Microsoft is looking at, the FT's sister paper, Les Echos, has learned.

The other options include a buyback, acquisitions and higher ordinary dividends. A decision is expected by the end of the year.

The software giant has come under pressure from shareholders to unlock its war chest as its shares have lagged and cash holdings have grown. A decision earlier this year to begin paying a dividend, which will amount to nearly $900m this year, will make little impact as it continues to generate $3bn of cash each quarter.

The $10bn a year of excess cash generated and President George W Bush's move to lower the tax on US corporate dividends have prompted Microsoft to consider a more generous payout policy. The company said when it originally announced its 8 cents per share dividend - the first paid in its 28-year history - that it would consider raising the payout. One option would involve distributing more than $1 per share at a cost of more than $10bn.

Microsoft has maintained it needs large cash reserves to cover potential legal risks from anti-trust actions and to buy back the billions of dollars worth of shares it issues to employees under stock options. plans. However, executives in recent months have said that with the company's legal problems receding and its cash mountain still growing, they would reconsider this policy.

"Two other options are being considered: a momentous acquisition or a share buy-back to perk up the stock price," said the person close to the discussions. A combination of the options has also not been ruled out.


TOPICS: Business/Economy; Front Page News; News/Current Events
KEYWORDS: computer; dividend; microsoft
As an MSFT shareholder, I'm happy. I just can't figure out exactly what they should do. An extra $1/share of cold hard cash would be nice but an effort to perk up the share price might result in more than a $1/share in gain. I'm not a fan of growing a business via acquistions although a buyout of TIVO could potentially start up a new business area (TIVO is struggling somewhat and buyout might push this excellent product into widespread adoption as a VCR killer). Heck, do both MSFT! Give us $1/share special dividend AND buy TIVO!

BTW, msft, if you do buyout TIVO, be sure to increase the bitrate on the recordings. Right now there's too much digital noise even in the best recording modes.

1 posted on 07/03/2003 4:35:45 PM PDT by mikegi
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To: mikegi
Maybe Microsoft could buy California. Couldn't get worse, right?
2 posted on 07/03/2003 4:41:38 PM PDT by thoughtomator (Abort, Retry, Fail?)
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To: mikegi
There's another way to look at this, mike. If MS invests its cash hoard rather than giving it to shareholders as dividends, it can continue to grow its revenues...
3 posted on 07/03/2003 4:45:54 PM PDT by Bush2000 (R>)
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To: mikegi
WOO fellow shareholder HOOOOOO!!!
4 posted on 07/03/2003 4:46:19 PM PDT by Pukin Dog (Sans Reproache)
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To: mikegi
although a buyout of TIVO could potentially start up a new business area

Didn't Micro$oft already have a DVR. Leave TIVO alone!

5 posted on 07/03/2003 4:47:41 PM PDT by AFreeBird
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To: mikegi
I think Bill Gates has about 141 million shares or so... this year he can splurge for christmas presents ;)
6 posted on 07/03/2003 4:49:11 PM PDT by dogbyte12
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To: mikegi
Sitting on $46B in cash and they're going to move jobs over to India .
7 posted on 07/03/2003 4:51:25 PM PDT by lelio
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To: Pukin Dog
WOO fellow shareholder HOOOOOO!!!

Here comes the Alternative Minimum Tax monster....

8 posted on 07/03/2003 4:53:16 PM PDT by Jeff Gordon
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To: mikegi
An extra $1/share of cold hard cash would be nice but an effort to perk up the share price might result in more than a $1/share in gain.

And just how are the two mutually exclusive?

9 posted on 07/03/2003 4:56:13 PM PDT by Glenn (What were you thinking, Al?)
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To: lelio
Waaaaaah!
10 posted on 07/03/2003 5:01:34 PM PDT by MonroeDNA (Happy Independance day! We owe our Freedom to Patriots, like JR.)
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To: AFreeBird
Didn't Micro$oft already have a DVR. Leave TIVO alone!

Yep, Ultimate TV or something. It was satellite only. Actually, what I'd really like is a Video Computer. It would be a box that handles AV switching and could accept plug-in peripherals. For example, the box would have hot-swappable slots where you could plug in various hardware: tuner cards, digital cable tuner cards, game cards, hard drives, etc. The idea is to reduce the TV set to just a monitor, reduce VCRs and DVDs, etc. to simple media storage devices, and reduce cable/digital cable/satellite tuners to simple media sources. The Video Computer box would do all the AV routing (in a far more sophisticated way than AV receivers do today). There would be one remote control and one user interface. No more worries about composite/SVideo/component cabling and switching. TV is a mess these days!

11 posted on 07/03/2003 5:08:54 PM PDT by mikegi
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To: mikegi
One option would involve distributing more than $1 per share at a cost of more than $10bn.

$1 a share comes out to more than $1bn total and 8 cents/share works out to $900mn then I guess there are 1.12bn shares subscribed; that's more than 2 shares for every man, woman, child and spooted owl on the planet.

How could they ever go bankrupt?

When did Gates ever find time to write code?

12 posted on 07/03/2003 7:02:41 PM PDT by Old Professer
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To: mikegi
It was not my intention to spoot the spotted owl.
13 posted on 07/03/2003 7:04:47 PM PDT by Old Professer
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To: Bush2000
If MS invests its cash hoard rather than giving it to shareholders as dividends, it can continue to grow its revenues...

The box they are in, unfortunately, is if they start doing more buying of comeptitors, they only attract more Anti-trust nonsense. Thus, requiring they horde more cash for defense. Kind of a catch-22.
14 posted on 07/03/2003 7:06:56 PM PDT by Daus
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To: mikegi
Is there a Corporate Tax guru in the house? I seem to remember some twist in the corporate tax code that turned on the idea of "excess accumulation." (Not the same thing as the way the term is used in Pension accounting). The idea was that by not paying your hoard out in dividends, you were depriving the IRS of an opportunity to tax it again. So they would come and get theirs anyway. Is that still out there? Might Microsoft be bumping up against that, where if they don't do something with it the Feds are going to take a bite anyway, under Magic Tax Gotcha #599?
15 posted on 07/03/2003 7:29:00 PM PDT by Nick Danger (The liberals are slaughtering themselves at the gates of the newsroom)
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