Microsoft Corporation, the world's largest software company, will make the world's largest corporate payout when it pays a $32-billion special dividend to its shareholders in December this year.
The company is known for sitting on a cash mountain and it was a historic moment when it decided that in a four-year period it will payout $75 billion to reduce its cash holdings by repurchasing billions of dollars in stock, increasing its dividend and making a huge, one-time payout to its shareholders.
The $32-billionpay out will kick off the plan. This will be the largest amount of capital ever returned to investors by a company anywhere inthe world.
Microsoft on Tuesday announced that its board of directors approved an $0.08 per share quarterly dividend, plans to buy back up to $30 billion of the company's stock over the next four years, and a special one-time dividend of $3 per share.
"We are confident in our long-term ability to grow revenue, profits and shareholder value through our innovation and execution. We have been successful in addressing a significant portion of our ongoing legal exposure, and all seven of our businesses are growing," said Steve Ballmer, Microsoft's chief executive officer, in a media release.
"We will continue to make major investments across all our businesses and maintain our position as a leading innovator in the industry, but we can now also provide up to $75 billion in total value to shareholders over the next four years."
"As we looked at our cash-management choices, our priorities were to increase our regular payments to shareholders, increase our stock-buyback efforts given our confidence in the company's growth prospects, and distribute additional resources in the form of a special one-time dividend," Ballmer added.
This payout will not affect Microsoft's commitment to research and development to fuel growth in the years ahead.
"We see incredible potential for our innovation to help businesses, individuals and governments around the world accomplish their goals, and we will continue to be one of the top innovators in our industry - as evidenced by the fact that we will file for more than 3,000 patents this fiscal year," said Bill Gates, Microsoft's chairman and chief software architect.
In the past two years, Microsoft has made significant progress in resolving many of the legal issues facing the company - including the recent US Court of Appeals decision reaffirming its settlement with the Department of Justice, most of the state class-action lawsuits, and the AOL and Sun Microsystems cases - along with patent claims such as the InterTrust litigation.
Resolving these issues marks an important step forward in clarifying Microsoft's legal and related business risk.
Under the plan approved by the Microsoft board, the company will move from its current annual dividend of $0.16 per share to a quarterly dividend of $0.08 per share, which would essentially double the annual dividend to approximately $3.5 billion, if continued at that level.
As a reflection of the company's strong financial outlook, the board also approved plans to buy back up to $30 billion in Microsoft stock over the next four years.
The company will also pay a one-time special dividend of $3 per share, or $32 billion, subject to shareholder approval of stock plan amendments that will allow certain adjustments to employee equity compensation awards to offset the impact of this large one-time payout, the Microsoft said. These steps would represent a combined total value to shareholders of up to $75 billion over the next four years, if quarterly dividends continue at the new level.
The quarterly dividend will be payable on Sept. 14, 2004, to shareholders of record on Aug. 25, 2004. The special dividend will be payable on Dec. 2, 2004, to shareholders of record on Nov. 17, 2004, conditioned upon shareholder approval of amendments to the employee stock plans at the annual shareholders meeting currently planned for Nov. 9, 2004.
Because the company's employee stock plans did not contemplate a one-time special dividend, the board has approved adjustments, subject to shareholder approval, that will protect employees as the share price declines due to the one-time special dividend.
"The innovations our employees have created over the years have made our company successful, and our stock compensation programs have been a critical part of our ability to create this shareholder value," Ballmer said.
"Adjusting the stock options and unvested stock awards held by our employees to offset the impact of the special dividend is a fair and logical step to ensure that our employees are not inadvertently disadvantaged by it. Our request that our shareholders approve the plan changes reflects our commitment to open interaction with our shareholders and good corporate governance."
