Microsoft announces $40 billion buyback
Posted
Sep 22 2008, 12:51 PM
by
Kim Peterson
Rating:
Microsoft just added some zing to its ho-hum share price by announcing a $40 billion share buyback. It also raised its quarterly dividend to 13 cents from 11 cents. The message to the market: While everything else is in the toilet right now, we're a solid buy.
Shares spiked on the news today but have since fallen back to about $25.95, or 3% above Friday's close. Two other companies announced smaller buybacks today. Hewlett-Packard approved an $8 billion share repurchase and Nike said it would buy back $5 billion over four years.
The buybacks are welcome news to investors whose heads are still spinning from last week, and could rev up the share prices of all three companies.
Analysts have estimated that a $35 billion leveraged share buyback would up Microsoft's 2009 EPS by about 13 cents. Microsoft had nearly $24 billion in cash and short-term investments at the end of June.
Microsoft has been steadily buying back shares for a few years now, but the Seattle Times said the company slowed its repurchase program in the last year to have more cash for a possible Yahoo acquisition. That fell through, and though Microsoft will likely still make acquisitions it appears to have nothing on the scale of Yahoo in its sights. Yahoo investors, accepting the final nail in the Microsoft acquisition coffin, sent shares down more than 4% today to $19.
Microsoft's board also approved debt financing of up to $6 billion, and it established a $2 billion commercial paper program. The market is hungry for high-quality commercial paper right now, Microsoft said.
Disclosures: I don't own shares of
any companies mentioned in this post. And while Microsoft owns this
blog, Microsoft does not control, censor or otherwise have any
editorial influence over what I write.
