Microsoft Gives Back, Grows up Talk about a way to please a crowd. Microsoft is finally dipping into its more than $56 billion cash stash, handing out a one-time dividend of $32 billion to its shareholders.
By Jonathan Krim Washington Post Staff Writer
Wednesday, July 21, 2004; Page A01
Microsoft Corp., which has amassed an unparalleled cash hoard of nearly $60 billion from its world-dominating software business, announced yesterday that it would return a large chunk of it to shareholders, much of it through a one-time dividend of $3 for every share held by investors.
With 10.79 billion shares outstanding as of March 31, the company will pay out more than $32 billion in that one stroke, pending approval of the plan by shareholders.
Company chairman and founder Bill Gates stands to get about $3.3 billion, and he pledged yesterday to give the entire amount to his family's foundation, already the nation's largest. Chief executive Steven A. Ballmer would get about $1.2 billion. But other large holders include mutual funds with millions of average investors, including the Vanguard 500 Index Fund, the Fidelity Magellan Fund and the College Retirement Equities Fund.
The software giant, which last fiscal year generated profit that averaged $1.1 million every hour, has been under mounting pressure from Wall Street to put its growing pool of cash to better use than simply earning interest. Despite Microsoft's remarkable business success, the company's stock price has languished for two years, while many other technology stocks have posted significant gains.
In addition to the one-time payout, the company said it would double its annual dividend to 32 cents per share and buy as much as $30 billion of its own stock over the next four years. Buying back shares rewards all shareholders because it tends to drive up the price of the remaining stock.
But it was the one-time dividend that had Wall Street veterans searching their memory banks for anything comparable. Such payouts have occasionally been used in the past, but typically as a way to ward off hostile takeover bids.
"It's such a unique situation," said Jonathan Rudy, a software sector analyst for Standard & Poor's, who said most technology companies offer no dividends at all and have nowhere near Microsoft's war chest. "I can't think of anything like it."
The Redmond, Wash., company, founded more than 25 years ago, has become a technology behemoth, with its Windows operating system powering more than 90 percent of the world's personal computers. The announcement came after the trading day ended with Microsoft shares at $28.32. The stock was up about $1.50 in after-hours trading.
Microsoft executives said they were able to make the move after resolving most of the major legal battles that have ensnared the company for nearly a decade, including a case that led to court rulings that Microsoft broke federal antitrust laws.
Two years ago, the company settled that case with the Justice Department in a deal that was upheld last month by a federal appeals court. The case spawned several corporate and class-action lawsuits, many of which also have been settled, with Microsoft making numerous cash payments.