http://www.ft.com/cms/s/0/bbb42cea-8906-11dd-a179-0000779fd18c.html
Microsoft reveals $40bn stock buy-back and borrowing plan By Richard Waters in San Francisco Published: September 23 2008 03:00 | Last updated: September 23 2008 03:00 Microsoft flexed its financial muscles in the face of the broader Wall Street liquidity crisis yesterday with the announcement of a $40bn stock buy-back programme and its first-ever plan to tap the public debt markets. In preparation for the debut, Standard & Poor's and Moody's said they had assigned a triple-A credit rating to the software concern, making it one of only five non-financial institutions to hold the top credit score. News of the latest stock repurchase plan lifted Microsoft's shares by more than 4 per cent in morning trading in New York. However, they still stood 20 per cent below their level in January, before Microsoft's unsolicited bid for Yahoo stirred up unease among investors about the software company's struggling internet strategy. Microsoft's plan to borrow on the capital markets, in spite of generating free cashflow each year of more than $14bn after capital spending and dividend payments, is the latest step in a gradual overhaul of its financial strategy. The company started paying annual dividends to shareholders in 2003 and later also made a one-off special dividend payment of $32bn after it came under pressure from shareholders to ease its traditional financial conservatism. Christopher Liddell, chief financial officer, first revealed that Microsoft was considering tapping the debt markets during its half- cash, half-stock bid for Yahoo earlier this year. He said at the time that it would probably go ahead even without a deal. Yesterday, the company said its board had authorised borrowings of $6bn, and that it had begun by starting a $2bn commercial paper programme. In spite of the adjustments in recent years, Microsoft executives have argued that the company needs to keep a generally cautious financial stance, reflecting the risks inherent in the software business. Moody's singled out the company's "conservative financial philosophy", as well as its strong cashflow and $28bn in cash and investments, to justify the decision to give it a triple-A rating. However, the gradual change in financial approach has done little to help Microsoft's share price, which stands at the lower end of the range it has traded in for the past seven years. Although Microsoft said that the $40bn buy-back had been authorised over the next five years, its recent history suggests it will probably move faster. The company bought back more than $12bn of its shares last year and has completed other recent buy-backs ahead of schedule. While the first small dividend payment left Microsoft's shares yielding only 0.29 per cent, successive increases since then have brought it more into line with other established companies. The latest 2 cents a share increase in the quarterly payment to 13 cents, announced yesterday, raises the yield to 2 per cent. --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
