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Get Four
|  | JULY 21, 2004
By Jay Greene Dollars Finally Rain from Redmond Over the next four years, Microsoft shareholders will see some $75 billion returned to them. Isn't this what mature companies do? Wall Street knew this day was coming -- and still its glee could barely be contained. Sitting on a enormous cash pile topping $56 billion, Microsoft (MSFT ) finally decided to share its bounty in a major way with stockholders. After the market closed on July 20, the Colossus of Redmond said it would double its dividend, buy back $30 billion worth of its stock over four years, and issue a one-time, $3-a-share dividend, equal to $32 billion. All told, $75 billion is headed toward shareholders. What's not to celebrate? "It's nice to have a good chunk of cash in your pocket," says Chuck Jones, vice-president of Stein Roe Investment Counsel, a $8 billion fund that counts Microsoft as one of its largest investments. That enthusiasm helped lift the stock by 5% in after-market trading, to $29.81. LARGESSE FROM GATES. Investors have pressed Microsoft for years to part with its ever-growing cash hoard. But Redmond fretted that legal squabbles could undo its business model, forcing it to tap its reserves as it mapped out a new business plan. To resolve the problems, Microsoft shelled out billions in recent months to settle case-after-case, erasing the unknown. It even won some clarity as the European Union completed its probe of Microsoft's anticompetitive behavior, fining it more than $600 million. "We are pleased that we have put many of our legal issues in the rear-view mirror, which affords us this opportunity to move forward with the cash-management plan," Microsoft CEO Steven A. Ballmer told analysts and journalists in a conference call. The biggest beneficiary of the special dividend: Microsoft Chairman Bill Gates, who'll receive $3 billion. Gates promised to donate the proceeds to his foundation. "The pledge today is recognition that our world, the nation, and our region -- now more than ever -- can and should dramatically improve equity in health, education, and access to information and human services for vulnerable families," Gates said in a statement. "FULL STOP. PERIOD." In truth, the real question wasn't whether Microsoft would reward its shareholders. It was always how much would it dole out. And the amount hit the high end of analyst expectations. The dividend doubling -- to 8 cents a share each quarter, from 16 cents a share annually -- brings Microsoft's yield to 1.2%, just shy of the average S&P 500 yield of 1.5%. The buyback amounts to a 25% boost over the annual stock repurchases that Microsoft has made in the last few years. But it's the one-time dividend, to be paid in December, that's truly eye-popping. It would reduce Redmond's cash holdings to levels not seen since 2000. Microsoft believes the payouts will make it the largest distributor of cash to shareholders of any company over the next five years. Ballmer was quick to dismiss any notion that a big, fat payout to shareholders is something only mature companies do. "I'm confident that we have some of the greatest dollar growth ahead of us. Full stop. Period," Ballmer declared. MIDLIFE TIME. Perhaps. Percentage growth is something else, however. Microsoft will post its fiscal 2004 results on July 22, and analysts expect sales to climb 13%, to $36.6 billion. But in fiscal 2005, they see sales inching up a scant 6%. And that's the real reason why Wall Street was so happy about Microsoft's payout. One of the greatest growth engines of the last quarter century has slowed down and become a mature company. And while Ballmer & Co. insist they'll continue to invest in new technologies, as well as in other companies, the dividend and buyback suggest that Microsoft's management has finally accepted the fact of maturity as well.  Greene is BusinessWeek's Seattle bureau chief
BW MALL
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