Microsoft to buy back another $40 bn shares

Technology and software giant Microsoft Corp yesterday announced that it plans to buy back an additional $40 billion worth of its shares by 31 December 2016 and is raising its quarterly dividend by 8 per cent, to 39 cents a share.

The announcement of an additional $40-billion stock buyback is on top of an existing $40-billion repurchase program that will also be completed by year's end.

Share buybacks tend to support a company's share price and are popular with investors. The latest move by the Redmond, Washington-based company is part of its plan to share the surplus cash with shareholders.

The latest buyback, which represents about 9 per cent of the company's market value of $442.7 billion, is over and above the $140 billion it has spent in buying back stock over the past several years.

Microsoft also announced that it was raising its quarterly dividend by 8 per cent, to 39 cents a share. Microsoft shares rose 1 per cent in after-hours trading

The company's stock has risen by 31 per cent in the past year, making Microsoft the third-largest company by market value in the Standard & Poor's 500 Index.

The latest $40 billion share buyback comes despite the company spending a whopping $26.2 billion in cash in buying professional networking website LinkedIn, which is Microsoft's biggest ever acquisition. (See: Microsoft to acquire LinkedIn for $26.2 bn in cash)

That was considered a high price for LinkedIn, which reported an annual loss of $166 million.

Microsoft chief executive Satya Nadella said it was part of Microsoft's transformation into a cloud computing business, providing a range of professional services to clients - including a social network to connect them to each other.

Although the company had $113.2 billion in cash and short-term investments as of 30 June, it would be interesting to see how it pays dividend and goes through its share buyback program since most of that money is held overseas and subject to US taxes if it is routed back to the country.