Microsoft is trying to put a floor under its share price in a tumbling stock market by launching the biggest share buyback program in history.
The software vendor announced the $40bn (sort of) jamboree for shareholders yesterday, as HP declared it too would open up the coffers and buy back shares to the tune of $8bn.
Microsoft has been criticised in the past for holding onto a vast cash pile. Now is as good a time as any for it to hand back something to its shareholders
With its share price languishing around the $25 mark – well off its 12-month high of $36 – Microsoft gets more bang per buck. In the medium term it will be hoping to stabilise its share price, and gets more shares back in-house for passing around in the form of options and the like.
Microsoft tickled shareholders further by upping its dividend to $0.13 per share. At the same time, its board has authorized debit financing to the tune of $6bn, which it will use for general corporate purposes – including stock repurchases.
Funnily enough, HP also chose to announce a stock repurchase program yesterday, though this was a more modest $8bn. It said the buyback was part of its “ongoing program to manage the dilution created by shares issued under employee stock plans and to repurchase shares opportunistically.” HP’s shares at $47 odd are off its 12-month high of $53.41, but also well up on the $40 they dipped to earlier this year.
This might all seem like a startlingly business-as-usual stance in the face of an unprecedentedly volatile market. The firms may simply want to give a little something back to investors in these desperate times.
And in the longer term they may be looking to ensure they have plenty of stock options to splash around to new recruits, now that the banking sector no longer looks so attractive the nation’s youngest and brightest. ®