Microsoft To Buy Back $40bn of Its Shares 345
phantomflanflinger writes "As you may have heard already, Microsoft have announced their intentions to buy back $40 billion in stock from their investors, in the biggest single buy-back plan in business history.
The announcement has given Microsoft shares a small gain but they still stand significantly below their level in January — before Microsoft's unsolicited bid for Yahoo!. The announcement of the plan has also created new speculation about a now-or-never deal with Yahoo!."
Re:well (Score:2, Insightful)
Re:Why do companies do this? (Score:5, Insightful)
You're a car manufacturer. You buy a bunch of cars when they're not very valuable, particularly old used cars on the secondary market. You destroy these cars in mass. This in the long term creates better higher demand (thus price/value) for newly-produced cars in the future, because there are overall fewer cars in circulation, particularly old clunkers that people might otherwise use instead of getting a new car.
Re:$40,000,000,000 (Score:4, Insightful)
It's also putting all your eggs in one basket,
Yeah, but MS isn't a mutual fund - they should concentrate on making good (or at least profitable) products and not worry about investing. As a stockholder, YOU should be the one diversifying - not MS. And the simpler they keep their business plan, the easier that is for you.
Re:It's funny, they've been having a lot of troubl (Score:5, Insightful)
in the last 15 years, Microsoft has lost over $10 billion on Windows CE/PocketPC/Windows Mobile alone. The Xbox venture is probably already around $20 billion and yes, they've lost billions on everything outside of their ability to leverage the desktop OS monopoly. IMO
I figure this is more to keep executives happy and employees happy as they have already seen 30% of their retirement vaporize this year alone.
As far as Vista goes, it is forced onto OEM PCs so they get paid just like they did when Windows XP was preloaded. They might have changed the payment some because of different version packages but it's preload $$$ that keep flowing to their banks and only OEMs going away from Windows is going to slow that down. That's taking a while but gaining momentum every day.
LoB
Vista Sales (Score:0, Insightful)
"Vista has been such a tremendous flop"
Do you have any idea what an idiot making such an inane assertion makes you look like?
Re:Why do companies do this? (Score:3, Insightful)
right... (Score:2, Insightful)
And we should trust you on your opinion about 'm$' because... you post things like these [slashdot.org] and have like 20 accounts [slashdot.org]. Right?
I see you have an active journal [slashdot.org] and write mostly about all the supposed bad things happening with Microsoft. Did you perchance write a long JE about how they turned a record profit last fiscal year? No, you probably only wrote one about how their revenue declined %20 in one quarter. It's always fun to look at the small picture when it suits you, isn't it?
I'm not even going to bother explaining how the stock market works here. I have a feeling it would do no good whatsoever.
I don't particularly like or dislike Microsoft. I use some of their products, and they are OK sometimes. But people like you are really weird.
Ahh, and now we see the REAL reason why... (Score:2, Insightful)
Now we see the REAL reason why the government failed to follow through on the punishment phase of MS's antitrust/monopoly furtherance conviction.
Hell, in light of that one, even the most liberal left winger would suspend MS's punishment and spin up a story to cover that one.
Re:$40,000,000,000 (Score:5, Insightful)
If I were a Microsoft shareholder, I'd much rather see excess cash returned to the owners (shareholders) than invested in unrelated things (like sub-prime mortgages!) in which Microsoft has no need for expertise except to invest their spare cash. In this case, I'd rather diversify my own portfolio through pure plays rather than through muddled investments in what is supposedly a software company but which in fact is more of an investment company. So, I'd like the cash returned to me - the most obvious ways are through dividends or increased stock valuation via buybacks.
Obviously, if the buyback leaves Microsoft cash starved so they later had to borrow money for new development and operations, the buyback would likely (although, not necessarily) have been a Bad Idea. However, if this were to happen, the problem would have been that the board was stupid, not that a buyback authorization was a bad idea since I believe this buyback is at the discretion of the board and they may not buy back a single share.
A buyback can be an effective way to return tax advantaged assets to investors. First, there have been many times when what are now called "qualified dividends" were taxed at ordinary income levels while capital gains were taxed at lower levels - and "tax reform" seems much more likely to repeal preferential tax treatment of "qualified dividends" while retaining some preferential treatment for capital gains than doing the inverse - so it's best to bet on capital gains rather than qualified dividends. Second, dividends are taxed in the year they are paid out - so in order for a long term investor to compound gains, they would have to infuse more outside cash with the "pay dividends" strategy (to cover the taxes paid prematurely on dividends) than to simply "buy and hold" a block of stock for many years and let it increase in value, in part, as a result of buy back rather than dividend payments.
Re:Mark Cuban was right ?? (Score:3, Insightful)
1929
Re:Vista Sales (Score:5, Insightful)
1. It doesn't require anything my 4 year old laptop doesn't have. 2ghz pentium M, 1gig of ram.
2. The bugs are greatly exagerated the only relavent one: slow file operations has been fixed since sp1.
3. Um I've run vista just fine on computers NOT marked as vista capable. And this is the same as #1 so you're just inflating your numbers.
4. Service Packs are always in development. THIS IS A GOOD THING.
5. And yet Windows 7 is still a ways down the road.
6. But the ad campaign proved what it was meant to. The majority of the trash talk about vista is just trash talk.
Extra: Vista has no "DRM crap" it only has support of certain DRM functionalities so that its now POSSIBLE for you to watch DRM protected content.
By any rational, unbiased inspection of the facts, your post is a colossal FUD.
Re:$40,000,000,000 (Score:5, Insightful)
No, spending your capital to buy back stock indicates that you have no ideas for using that capital to build your business, and are instead converting it into value for shareholders (the opposite of diluting your stock by creating new shares).
Essentially, Microsoft is doing what Dell thought Apple should have done ten years ago: shut things down and give the money back to shareholders.
If Microsoft had any implementable ideas, it would be using that $40 billion to make more money, just like Apple has used its capital to rapidly expand its business while earning more cash on hand. Apple isn't buying back its stock because it thinks it can make more for investors building new business than it can by simply giving the money back.
Google's Android Platform Faces Five Tough Obstacles [roughlydrafted.com]
Re:It's about the issuance of high-quality debt (Score:2, Insightful)
Microsoft was given AAA rating when they announced the issuance of $6 billion in bonds.
From the Economic Times [indiatimes.com]:
23 Sep, 2008 NEW YORK: Software giant Microsoft has been assigned the highest investment grade of 'AAA' by global credit rating agency Standard & Poor's, making it the first American non-financial corporate debt issuer to receive this rating in a decade.
Also from Forbes [forbes.com]:
09.22.08 - Moody's Investors Service said it assigned an 'AAA' senior unsecured debt rating to Microsoft Corp. reflecting the company's position as the world's largest software company with a strong and defensible market position throughout its diverse core offerings. The rating outlook is stable.
Re:$40,000,000,000 (Score:5, Insightful)
Please do not tell moderators what to do.
If you disagree with a poster, you should just respond to the post and explain your point of view.
This is a discussion forum, for crying out loud!
Re:$40,000,000,000 (Score:5, Insightful)
Pundits like to point out that Apple has 5% of the PC market. Yet Apple is sitting on $20 billion in cash.
No, Apple isn't blowing billions on products that don't work, it's turning that capital over to earn more.
Now, name implementable ideas Microsoft has rolled out lately. There's certainly nothing at all in consumer electronics. It only barely started breaking even on Xbox sales after having blow billions to develop it, and the 360 is now reaching its end of life and sales are rapidly tapering off. That's Microsoft's BIG SUCCESS! Everything else is in flames: Windows Mobile, Windows Media DRM, Zune, and every other product it has trotted out at CES over the last decade.
Re:$40,000,000,000 (Score:5, Insightful)
Microsoft spins its R&D into an "Other" category in its earning statements, and that segment blows through crazy billions of dollars. The problem is that nothing tangible results from all of that spending.
Apple has $20 billion, which for a company that earns haft as much revenue and a third the profits, is proportional to Microsoft. The difference is that Apple is growing and building new products and businesses, while Microsoft is servicing the same three monopolies it had ten years ago: Windows, Office, and Servers. Outside of those high profit cash cows, Microsoft hasn't done a damn thing in ten years. All three are now under attack.
Re:It's about the issuance of high-quality debt (Score:3, Insightful)
They're bond rating is "AAA"
Yes, but part of the reason for that was the large amount of liquid assets (marketable securities in the amount of $40+ billion) which meant that for any amount that they were likely to borrow the chances of them being unable or unwilling to repay their notes was practically non-existent. If they use most of the cash hoard to buy back equity shares then the future credit rating will more accurately reflect the likely future sales and licensing revenues of their flagship products (Windows and Office) which have hit a few bumps in the road over the past several years (the Vista debacle for instance) minus any liabilities (ongoing legal costs for example). This is almost certain to reduce their credit rating, perhaps to AA from AAA although nobody can say for certain (even the professional analysts) until Microsoft tries to float bonds or commercial paper in the open market subsequent to their using up the cash hoard.
Re:BUY BUY BUY! (Score:3, Insightful)
Macs may be the best Windows PC but all installing Windows does is install crapware. After buying and using Windows PCs for more than 10 years I finally got too aggravated with them and bought the MacBook Pro I'm typing this on last year.
So you replaced one proprietary system with vendor lock-in with another?