Tuesday, September 23, 2008

MICROSOFT PLANS DEBT ISSUE, $40 BN SHARE BUYBACK

Seattle
The Economic Times

Microsoft Corp plans to buy back up to $40 bn of its own stock, lift its dividend and issue commercial paper for the first time in the company's history, the software maker said on Monday. Microsoft was joined by top PC maker Hewlett-Packard Co, which announced a share buyback of its own.

H-P said its board of directors approved a plan to repurchase up to $8 billion worth of its own stock. One of the most cash-rich companies in the tech industry, Microsoft introduced a $2 billion commercial paper program and said it may issue as much as $6 billion of debt.

Standard & Poor's and Moody's Investors Service assigned their top credit ratings to Microsoft. "The openness to debt was the most surprising of this morning's announcements and is a positive signal of management's increasing openness to developing a more efficient capital structure," Charles Di Bona, a research analyst at Sanford C. Bernstein wrote in a note to clients.

Microsoft shares rose 86 cents, or 3.42 percent, to $26.02 on the Nasdaq after the announcement. The stock is down 27 percent in the year to date, compared with a 16 percent slide on the S&P 500 and the Nasdaq. H-P shares rose 21 cents to $48.47 on the New York Stock Exchange. Microsoft, which had $23.7 billion in cash on its balance sheet at the end of June, also said it would pay a quarterly dividend of 13 cents a share, up from 11 cents a share. Redmond, Washington-based Microsoft has been aggressive in buying back shares.

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