Cash-rich Microsoft plans to buy back $40bn of its own shares


The technology giant said it will buy up to 9 per cent of its outstanding shares, while also increasing its dividend payment by 8 per cent to $0.39 a share. The firm’s stock has increased 30 per cent over the past year, reports The Telegraph.

Microsoft, founded by Bill Gates in 1975, did not pay a dividend to shareholders until 2003, but has since become one of the biggest sources of income among US stocks.  Last year alone, the firm distributed more than $23bn to its investors.

The company has also established a track record of buying back its own shares, a tactic used to boost the price of the remaining stock, improve earnings per share and return cash to investors. The firm unveiled a $40bn buyback in 2007, replacing it with another programme of the same size in 2013. This scheme was due to expire at the end of the year, and its new buyback will come with no expiration date.

At current exchange rates, Microsoft will be buying back shares worth enough to theoretically buy ARM Holdings, which was until its recent takeover the UK’s biggest listed technology firm, with enough left over to also acquire Micro Focus, another FTSE 100 software company.

Meanwhile Microsoft is still working on its $26bn acquisition of the professional networking site LinkedIn, which it announced in June.

The windfall for shareholders comes a month after Microsoft launched its biggest ever bond sale, taking advantage of high demand for corporate debt to raise $19.75bn.

Microsoft is among the US technology firms that hold vast piles of cash outside the States, because to return it would incur a tax rate of up to 40 per cent. The company had $102.8bn held in foreign subsidiaries by the end of March.

Apple’s international cash pile of more than $200bn has caused political consternation at home and abroad, and chief executive Tim Cook has offered to repatriate several billion next year after the controversy surrounding its Irish tax bill.