Pangloss
07-22-04, 09:01 PM
Looks like Microsoft is finally going to do something with all that cash. I wonder if this may be one of biggest cash returns in corporate history.
http://www.geek.com/news/geeknews/2004Jul/gee20040721026098.htm
Specifically, Microsoft announced that it would effectively be doubling its dividend payout, from $.16 annually to $.08 quarterly. Additionally, the company will be asking shareholders to approve a special one-time dividend of $3 per share (totaling around $32 billion) which would pay out on December 2nd this year (Bill's approximately $3 billion will go to his charity). Finally, MS plans on buying back up to $30 billion worth of its stock over the next four years.
Just to add a bit of analysis to this (mainly because I'm writing a paper on this at the moment), I noticed that the amount of money that this deal will generate for the government in the form of taxes is about $3 billion! If I'm not mistaken, that's almost enough to run NASA for a year, at least since they lost a third of their fleet.
Maybe even more interesting is that I've read a couple of analysis articles that suggest that this move by Microsoft may actually have a more significant impact on the economy than the Bush tax cut, both in terms of pumping the budget (that $3 billion noted above) and in terms of impact on people's wallets. That's probably extreme -- I think the tax cut was something like $250 billion (?) over one year versus Microsoft's deal here at around $75 billion over five years, but it's an interesting point because the money goes directly to investors and will likely stay in savings/retirement plans. Something like 60-80% of it is probably going into money market accounts and massive investment plans anyway, and that money is *never* returned to the consumer directly (although I'm not sure with dividends, I don't know enough about it).
Those following my recent discussion with hypewaders on the pros and cons of the Bush tax cut vis-a-vis the debt problem will find that interesting. All of this is just idle speculation, so take it with a huge grain of salt, but I think it underscores just how big this Microsoft deal really is.
Oh, one other aspect of this thing that's interesting is that it's putting pressure on other tech firms that are cash-heavy to do the same. THAT will be very interesting to watch.
Some good reads on these subjects:
Forbes commentary by Dan Ackman covering several of these points:
http://www.forbes.com/personalfinance/taxes/2004/07/22/cx_da_0722topnews.html
(One of Ackman's more interesting points is that MS wants to do this distribution now while taxes on dividends are fixed at 15%. This was part of the Bush tax cut and Kerry wants to roll it back. Not hard to see Microsoft hedging its bets here.)
Toronto Star article, good insight on tax aspects:
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1090447812623&call_pageid=968350072197&col=969048863851
Bloomberg article, couple interesting points:
http://quote.bloomberg.com/apps/news?pid=10000103&sid=ah3uWsP.ZYrw&refer=us
http://www.geek.com/news/geeknews/2004Jul/gee20040721026098.htm
Specifically, Microsoft announced that it would effectively be doubling its dividend payout, from $.16 annually to $.08 quarterly. Additionally, the company will be asking shareholders to approve a special one-time dividend of $3 per share (totaling around $32 billion) which would pay out on December 2nd this year (Bill's approximately $3 billion will go to his charity). Finally, MS plans on buying back up to $30 billion worth of its stock over the next four years.
Just to add a bit of analysis to this (mainly because I'm writing a paper on this at the moment), I noticed that the amount of money that this deal will generate for the government in the form of taxes is about $3 billion! If I'm not mistaken, that's almost enough to run NASA for a year, at least since they lost a third of their fleet.
Maybe even more interesting is that I've read a couple of analysis articles that suggest that this move by Microsoft may actually have a more significant impact on the economy than the Bush tax cut, both in terms of pumping the budget (that $3 billion noted above) and in terms of impact on people's wallets. That's probably extreme -- I think the tax cut was something like $250 billion (?) over one year versus Microsoft's deal here at around $75 billion over five years, but it's an interesting point because the money goes directly to investors and will likely stay in savings/retirement plans. Something like 60-80% of it is probably going into money market accounts and massive investment plans anyway, and that money is *never* returned to the consumer directly (although I'm not sure with dividends, I don't know enough about it).
Those following my recent discussion with hypewaders on the pros and cons of the Bush tax cut vis-a-vis the debt problem will find that interesting. All of this is just idle speculation, so take it with a huge grain of salt, but I think it underscores just how big this Microsoft deal really is.
Oh, one other aspect of this thing that's interesting is that it's putting pressure on other tech firms that are cash-heavy to do the same. THAT will be very interesting to watch.
Some good reads on these subjects:
Forbes commentary by Dan Ackman covering several of these points:
http://www.forbes.com/personalfinance/taxes/2004/07/22/cx_da_0722topnews.html
(One of Ackman's more interesting points is that MS wants to do this distribution now while taxes on dividends are fixed at 15%. This was part of the Bush tax cut and Kerry wants to roll it back. Not hard to see Microsoft hedging its bets here.)
Toronto Star article, good insight on tax aspects:
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1090447812623&call_pageid=968350072197&col=969048863851
Bloomberg article, couple interesting points:
http://quote.bloomberg.com/apps/news?pid=10000103&sid=ah3uWsP.ZYrw&refer=us