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 dividendand 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 ofdirectors approved a plan to repurchase up to $8 billion worth of itsown stock.
One of the most cash-rich companies in the tech industry, Microsoftintroduced a $2 billion commercial paper program and said it may issueas much as $6 billion of debt. Standard & Poor’s and Moody’sInvestors Service assigned their top credit ratings to Microsoft.
"The openness to debt was the most surprising of this morning’sannouncements and is a positive signal of management’s increasingopenness to developing a more efficient capital structure," Charles DiBona, a research analyst at Sanford C. Bernstein wrote in a note toclients.
Microsoft shares rose 86 cents, or 3.42 percent, to $26.02 on theNasdaq after the announcement. The stock is down 27 percent in the yearto date, compared with a 16 percent slide on the S&P 500 and theNasdaq.
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 atthe end of June, also said it would pay a quarterly dividend of 13cents a share, up from 11 cents a share.
Redmond, Washington-based Microsoft has been aggressive in buyingback shares. It started a $36.2 billion five-year share repurchaseprogram in 2006, but spent that amount in two years.
In February, Microsoft raised the possibility of issuing debt forthe first time in the company’s history as part of how it planned tofinance 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- termgrowth of the company and our commitment to returning capital to ourshareholders," 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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