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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