Microsoft announces quarterly dividend increase and share repurchase program

It&#x27;s very interesting that Microsoft is the first large tech company to do this in the current cycle. So many of their peers are also wallowing in cash and seemingly unwilling to make large investments so the pile keeps growing.<p>Companies are supposed to use their capital to innovate and create new, market-changing products and services. Perhaps it&#x27;s because interest rates are so low and therefore capital is so cheap? Is the hording related to an expectation of another round of the regular tax amnesty for them to repatriate the funds to the US?

Both are ways to return money to the shareholders with the balance shifting from giving more flexibility to the shareholders vs more flexibility to the company. Of course the chunks are substantially larger when it comes to buying back individual shares vs paying out a (still relatively small) dividend so there will likely be a balance struck between the two.<p>By announcing a share repurchase they are also signalling they believe that the shares are undervalued but the strength of that signal is strongly dependent on the amount of money they commit to buying back stock, in this case about 1&#x2F;7th of their total cap.

Subtext: We don&#x27;t know where to put the $$ at this critical transition point (Ballmer leaving). Rather than figuring it out, we&#x27;re just going to give the money to shareholders -- that&#x27;s the safe way so that they can&#x27;t question our fiduciary responsibility.

I never understood the purpose of share buybacks. Sure there will be less shares outstanding but the company will be worth that much less from having spent the cash to buy the shares.<p>How does that benefit anyone?

I wonder what this means in terms of Microsoft&#x27;s overall corporate direction... however, the scale isn&#x27;t large enough to indicate that they intend to stop deploying cash to expand into new markets. (e.g., instead of throwing billions to promote bing, they just return the money to shareholders).<p>Still, it&#x27;s a noteworthy change that might mark the beginning of a change towards the post-Ballmer era.

They&#x27;ve been a revenue producer and not a growth producer for a long time now, so it&#x27;s good that they&#x27;re finally paying out some dividends.