Wednesday, July 21, 2004

Microsoft pays the biggest dividend ever 

By a long shot.

This afternoon after the market closed, Microsoft announced that it would distribute $75 billion -- that's $75,000,000,000 -- to its stockholders over the next four years. The distributions will include a one-time $3 per share dividend, a doubling of the now routine annual dividend, and a huge share repurchase program. I believe I'm correct that no similar program has ever gotten close to this size, at least not in nominal dollars. It would be interesting if somebody smart would use the vast resources at his disposal to figure out whether there have been larger non-liquidating distributions measured in constant dollars.

Amazingly, the blogosphere seems to be silent on this story, probably because they can't get enough of Bergergate. Too bad, because this is huge news.

Herewith, a few TigerHawk comments and predictions.

First, it will be a big boost to the stockmarket, particularly the liquid tech companies. Why? Because a flood of new money will be coursing through the system, and it will get reinvested somewhere.

Second, in a couple of years we will see that Microsoft has started another trend. Nobody else can be as dramatic as Microsoft because nobody else has more than $60 billion in cash on hand. But now stockholders will have a precedent to cite to companies that are sitting on huge piles of cash -- if Microsoft can figure out how to distribute it after years of hoarding their money, then so can Cisco, Pfizer, and any number of other companies with lots of cash. And directors, who generally want to do what other people do, will feel more comfortable distributing significant cash to stockholders.

Third, corporate governance fetishists will applaud this. They will say that it is better that corporations distribute their surplus cash than blow it on management compensation or ill-considered acquisitions. There is a certain minimalist truth to this idea, although it is probably better applied to companies other than Microsoft.

Fourth, this will improve Microsoft's chances of fending off anti-trust prosecutions. Microsoft's huge cash hoard makes it scarier to people with regulatory urges. Once that hoard goes away, it is harder to fulminate against its corporate power.

Fifth, some people have argued that federal corporate tax law required Microsoft to distribute some of its cash (can't remember the rationale). That argument goes away.

Sixth, paradoxically, Microsoft is going to become an even scarier competitor in the software business. Why? Because it will no longer be able to acquire its way out of innovation crisis, either by diversification into non-software businesses or by buying competitors. Now it will have to innovate. This distribution may change Microsoft's culture.

Seventh, I believe this was in the works for some time. Big dividends are bad news for holders of options (the higher a dividend, the less valuable an option to buy the underlying stock), but neutral to good news for stockholders. Remember that Microsoft swapped its employees out of their options and into restricted stock last year. We now know that that transaction paved the way for this mammoth distribution.

I have more thoughts, but I'm tired so I will offer only this parting shot:

Eighth, if you own MSFT, don't spend it all in one place.

UPDATE (9:20 AM, 7-21): Tyler Cowen has more, asking inter alia whether Microsoft is signalling that it believes John Kerry will win.


By Blogger tweedledeetweedledum, at Sat Oct 01, 04:50:00 AM:

This blog is awesome! If you get a chance you may want to visit this software site, it's pretty awesome too!  

By Blogger EQQU, at Sat Oct 01, 07:24:00 PM:

Great blog,
I surf a lot a day, and want to tell you yours is cool:
Free Email Pays  

By Blogger St Louis Cardinals BUFF, at Mon Oct 03, 07:10:00 PM:

Join the only TV advertised affilated program and cash in on the masses that will be joining TVcoop.netmake money  

By Anonymous Anonymous, at Sun Oct 09, 01:05:00 AM:

You have a very good site on making money. This is something I also have a large interest in and have set up a website about making money. Please visit and let me know what you think.

Hilda Johnson-Slaton
Risk-Free Money Auto Income Generator

By Anonymous black mold, at Thu Apr 24, 11:00:00 AM:

black mold exposureblack mold symptoms of exposurewrought iron garden gatesiron garden gates find them herefine thin hair hairstylessearch hair styles for fine thin hairnight vision binocularsbuy night vision binocularslipitor reactionslipitor allergic reactionsluxury beach resort in the philippines

afordable beach resorts in the philippineshomeopathy for eczema.baby eczema.save big with great mineral makeup bargainsmineral makeup wholesalersprodam iphone Apple prodam iphone prahacect iphone manualmanual for P 168 iphonefero 52 binocularsnight vision Fero 52 binocularsThe best night vision binoculars here

night vision binoculars bargainsfree photo albums computer programsfree software to make photo albumsfree tax formsprintable tax forms for free craftmatic air bedcraftmatic air bed adjustable info hereboyd air bedboyd night air bed lowest pricefind air beds in wisconsinbest air beds in wisconsincloud air beds

best cloud inflatable air bedssealy air beds portableportables air bedsrv luggage racksaluminum made rv luggage racksair bed raisedbest form raised air bedsaircraft support equipmentsbest support equipments for aircraftsbed air informercialsbest informercials bed airmattress sized air beds

bestair bed mattress antique doorknobsantique doorknob identification tipsdvd player troubleshootingtroubleshooting with the dvd playerflat panel television lcd vs plasmaflat panel lcd television versus plasma pic the bestThe causes of economic recessionwhat are the causes of economic recessionadjustable bed air foam The best bed air foam

hoof prints antique equestrian printsantique hoof prints equestrian printsBuy air bedadjustablebuy the best adjustable air bedsair beds canadian storesCanadian stores for air beds  

By Anonymous Anonymous, at Mon Dec 29, 06:52:00 PM:

Dog tags
Metal Badges
Printing Badges
Lapel Pins Manufacturer
Cuff Links
Metal Badges
Bottle Openers
key chains
trading pin
Flag Lapel Pins
Police Badge
wristbands wholesale
Disney Pins Wholesale
mouse pads manufacturer
mouse pads
Lapel Pins Manufacturer

Post a Comment

This page is powered by Blogger. Isn't yours?