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Microsoft Ups Dividend, Boosts Share Buyback

By Reuters -  |  Posted 2008-09-22 Print this article Print

Microsoft is making a huge stock reinvestment in itself and upping its quarterly dividend while also allowing for debt financing for general corporate purposes.

SEATTLE (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) plans to buy back up to $40 billion of its own stock, lift its dividend and issue commercial paper for the first time in the company's history, the software maker said on Monday.

Microsoft was joined by top PC maker Hewlett-Packard Co (HPQ.N: Quote, Profile, Research, Stock Buzz), which announced a share buyback of its own. H-P said its board of directors approved a plan to repurchase up to $8 billion worth of its own stock.

One of the most cash-rich companies in the tech industry, Microsoft introduced a $2 billion commercial paper program and said it may issue as much as $6 billion of debt. Standard & Poor's and Moody's Investors Service assigned their top credit ratings to Microsoft.

"The openness to debt was the most surprising of this morning's announcements and is a positive signal of management's increasing openness to developing a more efficient capital structure," Charles Di Bona, a research analyst at Sanford C. Bernstein wrote in a note to clients.

Microsoft shares rose 86 cents, or 3.42 percent, to $26.02 on the Nasdaq after the announcement. The stock is down 27 percent in the year to date, compared with a 16 percent slide on the S&P 500 and the Nasdaq.

H-P shares rose 21 cents to $48.47 on the New York Stock Exchange.

Microsoft, which had $23.7 billion in cash on its balance sheet at the end of June, also said it would pay a quarterly dividend of 13 cents a share, up from 11 cents a share.

Redmond, Washington-based Microsoft has been aggressive in buying back shares. It started a $36.2 billion five-year share repurchase program in 2006, but spent that amount in two years.

In February, Microsoft raised the possibility of issuing debt for the first time in the company's history as part of how it planned to finance its pursuit of Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz). A deal between the two companies has not panned out.

"These announcements illustrate our confidence in the long- term growth of the company and our commitment to returning capital to our shareholders," Chris Liddell, chief financial officer of Microsoft, said in a statement.

(Reporting by Daisuke Wakabayashi and Franklin Paul; Editing by Derek Caney and Andre Grenon)

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