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Microsoft The Almighty Buck

Microsoft Considers $10 Billion Dividend 630

Posted by michael from the money-money dept.
Dreadnougat writes "Microsoft is considering paying out a $10 billion dividend, the largest corporate payout ever. Cynics (ok, anyone reading /.) might note that Bill Gates stands to make $1.18 billion himself off the $1 a share dividend, in comparison to the $95 million he makes in a normal year off the regular 8 cents a share dividend."
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Microsoft Considers $10 Billion Dividend More

Microsoft Considers $10 Billion Dividend

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  • Standard Procedure (Score:5, Funny)

    by Shadarr ( 11622 ) on Friday July 04, 2003 @08:02PM (#6370116) Homepage
    This is the main way of funnelling profits from your company account to your personal account in Railroad Tycoon.

  • Ahh (Score:3, Insightful)

    by jsgates ( 232994 ) on Friday July 04, 2003 @08:02PM (#6370119) Homepage
    If only I'd bought that Microsoft stock when I was born.

  • /.-centric summary. (Score:5, Insightful)

    by Anonymous Coward on Friday July 04, 2003 @08:03PM (#6370122)
    MS is paying money to it's loyal investors because Bill Gates is greedy.

    Had MS not payed out, the summary would have been:

    MS is not paying out money to it's loyal investors because Bill Gates is greedy.
    • Yes, and in both cases, the /.-centric summary would be valid.

      In any case, the greed of Bill Gates doesn't start with dividend payouts, it starts with wanting to own the entire computer industry and crushing every competitor to dust through unfair competition and sleazy tricks.

      • Re:/.-centric summary. (Score:5, Insightful)

        by NanoGator ( 522640 ) on Friday July 04, 2003 @10:23PM (#6370640) Homepage Journal
        "it starts with wanting to own the entire computer industry and crushing every competitor to dust through unfair competition and sleazy tricks. "

        And, as a fallback plan, they make products people want.

        • Re:/.-centric summary. (Score:5, Insightful)

          by 73939133 ( 676561 ) on Saturday July 05, 2003 @02:37AM (#6371389)
          And, as a fallback plan, they make products people want.

          So did Standard Oil and Ma Bell, and we still broke them up because they were ultimately harmful to the economy and not in the interest of consumers.

          And so do cigarette makers and drug dealers, for that matter.

        • Re:/.-centric summary. (Score:4, Insightful)

          by slimme ( 84675 ) on Saturday July 05, 2003 @06:44AM (#6371852)
          And, as a fallback plan, they make products people want.

          They make products people buy. I don't know anyone that wants Microsoft products. I know people that want a big house, a BMW, ...

          The people I know don't care for what's on their computer. It just happens to be Microsoft. That's why Bill Gates is rich. He makes a product that few people really want, but everybody buys.

    • Re:/.-centric summary. (Score:5, Informative)

      by Amiga Trombone ( 592952 ) on Friday July 04, 2003 @08:15PM (#6370183)
      Actually, it's probably both.

      When MS stock was ascending in value, it was worth Gates' while to not pay a dividend, because he'd have to pay taxes on on any dividend he earned from it. He didn't have to pay taxes on the stock as long as he didn't sell it.

      Now that the price is stable, if not dropping, he's better of paying the dividend, because even though he has to pay taxes on it, he gets money out of MS before his stock loses any more value.

      • Re:/.-centric summary. (Score:5, Informative)

        by TheMidget ( 512188 ) on Saturday July 05, 2003 @05:36AM (#6371741)
        Moreover, he might hope that the dividend payment might prop up the falling stock price.

        Stock price is justified by the profit potential of a share. For instance, if you expect a share to yield 6 cents of profit per year, and current interest rates is 3%, you'd be ready to spend $2 for that share (3% of $2 is 6 cents). (This simplistic calculation needs of course need to be adjusted for risk: you expect your shares to pay higher interest rates than your savings account, because they carry higher risk ==> so you'd probably put a price less than $2 on the share..)

        For a non-growing share, all profit you can expect from a share is dividend. Thus higher dividend means better share price.

        For a growth stock, profit is not only the dividend, but also the price increase of the share itself. In a way, the share price feeds itself... until the bubble bursts. That's why until recently, MS didn't pay any dividend at all: its exponential growth was justification enough for its "value". However, since 1999, MSFT's share price has been more or less flat (or even, falling), thus growth can no longer justify what little value remains. MSFT has to pay a dividend to stop the downfall.

        Of course, smart economists may realize why MSFT is paying these huge dividends (because the stock would suck otherwise), and the move might have just the opposite effect...

        Bill Parish [billparish.com] has an interesting writeup about this. The report is quite old (November 1999), so many of those things that have already come to pass are still predictions...

        A more up to date press list [billparish.com] can be found here (not all references articles are about MSFT, but most are...)

    • Exactly (Score:2, Insightful)

      by Mod Me God ( 686647 )
      Had MS not paid out a dividend they would have retained (allowing for various tax differences in what they do with the money) this much more as free cash (i.e., capital), hence the firm would increase in value via an increase in the share price.

      To realise this gain in cash, investors would just sell shares. Or even, to maintain parity, MS would issue shares to existing shareholders pro rata who could then sell them if they wished.

      The fact there is a dividend or not matters little unless we go into the in

    • Re:/.-centric summary. (Score:5, Funny)

      by istartedi ( 132515 ) on Friday July 04, 2003 @08:22PM (#6370217) Journal

      Dear Mr. Gates, please choose one of the following:

      [ ] damned if you do
      [ ] damned if you don't
      [ ] just plain damned
      [ ] all of the above
  • Come on, people - I _highly doubt_ Bill really cares whether he makes a hundred million or a billion dollars. If anything, it'd probably be more of a hastle for him, with all the extra taxes. Besides, is he even the guy that makes this decision anymore? He's not CEO. Perhaps an accountain could help me out on this one?
    • Oh, I don't think he has to worry about the taxes anymore. Our good friend George fixed that for him. Besides, would you really mind paying taxes on a billion dollars? I think I could live with it.
      • It is an excellent way for the thumbheads at M$ to get at that $40billion hoard of cash, turn it into tax-free cash in their own bank.

        Being that there will be a huge payout in stock options for those M$ employees who will be retiring soon undet their ESOP Ponzi Scheme, if Gates and friends gets the cash out NOW, then it won't matter so much that the stock price gets diluted to nothing when the retirements hit.

    • The owner of a company has much more power than the manager, even if it isn't excersized as often.
    • Um, well, No Taxes:

      Didn't GWB eliminate taxes on dividends? That'd be pure cash for the Gatester, right?

  • What would you do with $10bn? (Score:4, Funny)

    by Realistic_Dragon ( 655151 ) on Friday July 04, 2003 @08:03PM (#6370124) Homepage
    1) Buy SCO and read their evil plans before making them all walk the plank.

    2) Put it all in a massive pool and swim in it.

    3) Buy out every cell phone company in your state and turn them off *just to stop the stupid ringtones*.

    4) Spend the rest on pr0n.
  • I wish there were more situations where I had so much money I had to give it away just to keep it managable.

  • Damned if They Do .... (Score:4, Insightful)

    by tealover ( 187148 ) on Friday July 04, 2003 @08:05PM (#6370137)
    Why shouldn't Gates earn dividends on his shares? His dividend payment would be proportionate to the amount of shares he owns.

    I guess certain people have to find any excuse to attack the man.

  • Hopefully it'll be trend. (Score:5, Insightful)

    by eidechse ( 472174 ) on Friday July 04, 2003 @08:07PM (#6370143)
    It'd be nice to see dividends once again be the main way most people expect to make money with stocks. Especially tech stocks. Focusing on the worth and stability of a company is a good thing. IMO, building money over time through dividends is more practical (read: safer) for small time investors than speculation.
  • If so, wouldn't bill get those billions without having to hand a few hundred million over to Uncle Sam?

  • better way (Score:2, Funny)

    by myoohn ( 631500 )
    Yikes! there is a better way to reduce that cash pile. Give away 10 billion to people on the planet.6billion/10billion=1.6$ so, microsoft should starts giving out 1.6$ to everyone. That way, they may even start to love Bill Gates. wait no, considering their crappy software costs ten fold more...eh

    • best way (Score:2, Funny)

      by dekashizl ( 663505 )
      What Microsoft should really do is host a T-Shirt design contest, where the winner gets three copies of the shirt they designed and a $10 billion credit at ThinkGeek [thinkgeek.com].

  • Here's an idea (Score:3, Funny)

    by Anonymous Coward on Friday July 04, 2003 @08:09PM (#6370156)
    secure the damn OS.

    Thanks.
  • ...it's a dollar a share. It's a lot of money for Gates because he owns billions of Microsoft shares. But for your average Microsoft stockholder it's only a fraction of a fraction as much. Nobody's "buying off" anyone. Dividends happen not infrequently, and as it happens Microsoft had a lot of excess cash to divide.
  • The company, recently under pressure to distribute some of its cash, is also considering stock buybacks, a major acquisition and higher ordinary dividends, the report on (http://ft.com) said.

    Let's see, which would Microsoft most likely buy?

    • Apple
    • IBM
    • Redhat
    • SCO
    • Cmdr Taco

  • Huh? Regular dividend? (Score:5, Insightful)

    by ComputerSlicer23 ( 516509 ) on Friday July 04, 2003 @08:14PM (#6370178)
    Hmmm, the poster says, "the regular 8 cents a share dividend". Uhh, didn't Microsoft just pay it's first dividend in the last 12 months. I don't believe they've paid out more then 4 of them, I'm reasonably sure they have only made one dividend payment in their entire corporate history. I'm too lazy to go track down the Slashdot story or the SEC filing on the matter.

    Now that there is no dividend tax and Microsoft is no longer a growth company, there isn't any good reason not to pay the stockholders. When there was a dividend tax, Microsoft could argue that by keeping the money, they could put it to more efficient use to build stockholder value in terms of share value, rather then giving some of it to the stockholder, and some of it for the gov't. The other point is, that Microsoft is done growing by leaps and bounds. They don't need any more capital to grow, or smooth out cashflow issues, or any other standard business reason why a company normally keeps money cash on hand.

    I believe the shareholders are starting to demand it, as that's the one way the shareholders can get their money out, without having the price go up or down. It's a sign that Microsoft is turning into an old school established company, like so many others, rather then being a hot commodity stock that creates value, because the company keeps growing, and building up more value.

    Kirby


    • I'd say the factors behind this are:

      1) M$ had an inordinate amount of money stashed away, pushing the limits of accounting rules for contingencies, earmarks for future projects, etc., but with being threatened with breakup it's hard to argue with what all contingencies they may have needed to consider.

      2) With settlement of the suit, that excuse went away. They have to pay out a dividend because the IRS says so.

      3) They held out (wink, wink IRS) until the Republicans reduced the dividend tax.

  • Microsoft vs. Sun (Score:5, Interesting)

    by darnok ( 650458 ) on Friday July 04, 2003 @08:15PM (#6370182)
    There was an interview with Scott McNealy in one of the Linux magazines a few months back. In it, he said (paraphrasing) "if Sun ever pays out a sizeable dividend, it means we've run out of R&D ideas and the company's in trouble". I don't remember the exact wording, but that's the gist of it.

    Essentially, Sun's policy is to reinvest all profits back into the company. Putting it another way, they're banking on being able to keep growing the company indefinitely and thus keeping shareholders happy solely through upward movement in the share price.

    It seems that this may have been Microsoft's policy as well until now. Conspiracy theories aside, it'd be interesting to know what changed to make them issue a big dividend after all these years.
    • I'm sure that Microsoft plans to invest billions of dollars in R&D, but they currently have $45 billion in bank. Microsoft is a stunningly successful company (financially at least) and $45 billion is an exceptional amount of money. Why they decided to spread $10 billion? I don't know exactly why, but the followings are my guess:

      1. Now that antitrust law suits mess are getting cleaned up, they can safely spend $10 billion out of $45 billion; nothing much to worry about any longer.

      2. After all, they

  • good idea (Score:4, Informative)

    by tomlord ( 473109 ) on Friday July 04, 2003 @08:25PM (#6370228)
    There's exactly two legitimate bases for stock valuations: one is dividends, the other is a cycle of systematic buy-backs and new issues.

    Absent either of those two options, what have you got? You've got someone saying to the market "Hey, loan us some money. We never intend to repay, but perhaps you can sell our note to someone else for a profit."

  • Standard Oil (Score:3, Insightful)

    by BigBadBri ( 595126 ) on Friday July 04, 2003 @08:28PM (#6370238)
    Reminds me of the period in the late 19th century when Standard Oil paid no dividends (it was such a poor company) until Rockefeller finally got full control, and the tax regime was right, so Rockefeller sucked huge amounts of capital out before the anti-trust case.

    Bill's waited antil after the anti-trust case, but since he's ignoring it anyway, he's not likely to give a shit.

    Good move, Bill - you are now, officially, a Robber Baron

  • Interesting development (Score:5, Interesting)

    by Pettifogger ( 651170 ) on Friday July 04, 2003 @08:32PM (#6370252)
    Hmmm... anyone wonder why Microsoft is really doing this? No, it's not Gates' greed; he has enough and he knows it. This is a plan to ensure the long-term stability of the company. Linux is starting to get more press and is being increasing seen as a viable alternative. I think this is a strategy to increase investor confidence and tie the company's financial rewards more to the public. Everyone knows what the profit margin is on their products and that the corporation itself keeps almost all of that. I think this is a subtle way of saying that they're going to start sharing their big income.

    And consider this: a lot of companies, institutions, foundations, trusts, etc. regularly buy securities for endowments and other investment purposes. Now, if Microsoft stock is a good performer, it would give Microsoft an "in" with those companies and institutions for software sales.

    No matter what you think of Microsoft (and for the record, I do not have a single Microsoft product under my roof) this is a smart business move. And I might add that Linux cannot compete on these grounds, either. Smart move... seriously.

  • Milk the cow now she'll be dry in a year.

  • Who Said $1 Per Share? (Score:5, Interesting)

    by reallocate ( 142797 ) on Friday July 04, 2003 @08:36PM (#6370266)
    Where'd that "$1 per share" stuff come from? All the reports I've seen today speculate about an increase from 8 to 26 cents per share, max.

    But then, Slashdot could only troll about Gates taking 2 billion, not 10 billion. I'm sure it was just an editorial typo. Heh.
    • Where'd that "$1 per share" stuff come from? All the reports I've seen today speculate about an increase from 8 to 26 cents per share, max.

      According to yahoo finance, MSFT is currently trading at 26.48 and has a market capital of 284.2 billion. So you divide the market cap by the trading price to get the number of shares.

      That's 10.7 billion shares. $10 billion distributed into 10.7 billion shares is roughly $1 per share.

      Gates had roughly 600 million shares before the split, so now he's got 1.2 bil

  • Need to Pump Up Stock Price (Score:5, Interesting)

    by virtigex ( 323685 ) on Friday July 04, 2003 @08:59PM (#6370370)
    The biggest problem that Microsoft has to deal with is their langusihing stock price. When the stock stalled in in 2000 many people left, because there was no more money to be made from the stock options.

    Microsoft is made up of a load of long-timers who have made enough money through stock options that they don't really have to work and the newcomers whose stock options have been underwater for several years.

    Without stock options (and the money generated with a rising stock price) neither the money or the work environment is much to write home about. Neither the old-timers or newcomers are particularly motivated and most of the "innovation" goes on by buying smaller companies.

    Issuing a dividend is one way to pump the stock price up and thus motivate some employees.

    • Re:Need to Pump Up Stock Price (Score:4, Informative)

      by steve_stern ( 686745 ) on Saturday July 05, 2003 @01:48AM (#6371237) Homepage
      You clearly are not a Microsoft employee, nor do you know too many Microsoft employees.

      Yes, the long term employees are filthy rich and never have to work another day in their lives. Pumping up the value of the stock doesn't change that fact in any way, shape, or form (if anything, it makes them even MORE filthy rich once they decide to retire and sell all their stock, which makes them more likely to retire in the first place).

      Those who are not filthy rich are very happy to work there, because it is a great work environment, and the pay is damn good. Trust me, I know. Say what you will about their software - they treat their employees like gold.
    • How do you explain this then:
      - They consistently rank amongst the top 100 employers listings in most countries they are in(number one in the UK at the moment)
      - Their staff turnover is about half the industry average
      - When the stock price started slowing, they increased the salary of all employees

      How parent got to 5 is beyond me...

  • Eternally Evil? (Score:3, Flamebait)

    by Drestin ( 82768 ) on Friday July 04, 2003 @09:00PM (#6370373)
    Yea yea, I'll probably be modded flamebait or troll but... come on! ANYTHING MS does is immediately evil? Look, for the first time ever last quarter they paid out 8 cents a share dividend, because it made financial sense. This time they have looked and, again, it made good solid financial sense to pay a dividend. It's good for the stockholders, it's good for the economy and, yea, it's good for Gates and other execs (because they believe enough in their company that they own shares in it too). How is it even remotely possible in any way, shape or form that MS giving it's shareholders money is anything but good for everyone? Indirectly, even non-stockholders benefit (think about it).

  • Balance of life (Score:5, Funny)

    by Anonymous Coward on Friday July 04, 2003 @09:02PM (#6370386)
    With Windows you can get Money.

    With Linux you can get Enlightenment.

    Really.

    • however (Score:3, Funny)

      by Trepidity ( 597 )
      There will be an interval of at least four years before your Enlightenment can progress to the next level, and some even claim that the a higher level of Enlightenment than already attained will never come to fruition.

  • Long Overdue (Score:5, Insightful)

    by Ars-Fartsica ( 166957 ) on Friday July 04, 2003 @09:12PM (#6370427)
    Microsoft has been sitting on a cash mountain they are essentially unwilling to spend. They can simply swap stock for acquisitions, so without a pressing capital expenditure this cash should be returned to the owners of the corporation.

    This may make the stock rise - too much cash on hand is often seen as a negative by analysts.

  • WOW (Score:5, Funny)

    by kruczkowski ( 160872 ) on Friday July 04, 2003 @09:16PM (#6370441) Homepage
    So I'm going to get $1 for the one share of MSFT I own! Wow, now I only lost $24.34 to MSFT!!!

  • Question about this... (Score:3, Interesting)

    by Kickstart70 ( 531316 ) on Friday July 04, 2003 @09:21PM (#6370462) Homepage
    How long do you have to ordinarily hold a stock before receiving a dividend? Could I buy M$ stock now and get the dividend?

    How often are announcements like this followed up? How many dividend payouts are there in a year?

    What I'm wondering is if I could make better profits from buying and selling at dividend time than the crappy 3% I get from the bank.

    Kickstart

  • Damned if they do, damned if they don't (Score:3, Interesting)

    by lseltzer ( 311306 ) on Friday July 04, 2003 @09:22PM (#6370465)
    After Ralph Nader wrote MS a letter in January 2002 urging them to pay a substantial dividend [cptech.org] you'd think other reflexive MS critics would applaud the move. Not the case here, where anything they do, no matter what, is the urging of Satan. This site can be a cesspool of shallow thought sometimes.

  • 10B$??? (Score:3, Funny)

    by tcc ( 140386 ) on Friday July 04, 2003 @10:28PM (#6370655) Homepage Journal
    sorry but 640K$ should be enough for everyone...

  • Paying Dividens is a Bad Sign (Score:5, Insightful)

    by Nice2Cats ( 557310 ) on Friday July 04, 2003 @11:15PM (#6370814)
    A while ago, we had a review on Slashdot of a book by one Andy Kessler [slashdot.org] from Wall Street who wrote an article in December 2002 called "I hate dividends" [andykessler.com] (see, somebody does follow those links). He has a couple of interesting quotes there:

    [A]s an investor, I avoid companies that pay dividends like the plague, and you should too. Why? Because when they pay a dividend they are admitting they have nothing better to do with their money. If they won't invest in themselves, why should I?
    and
    Dividends entice investors into debt-laden, slow- or no-growth companies, more likely to cut their dividend, burning investors worse than conflicted research analysts. Run away. They are wearing a scarlet dollar sign. You want yield? Buy a bond.
    and
    Failing companies just bribe investors with dividends. Encourage companies with a future to invest in their operations, seeking high returns. If all that mattered were dividends, we (...) would still be investing in railroad stocks.

    I think we can rule out Microsoft being "debt-laden", but it still sheds an interesting light on how finanicial people with a tech background will be looking at this move: The growth days are over, and from here on, it is stagnation.

    (Disclaimer: Everything I ever needed to know I learned from Slashdot)

  • gates is evil but he isn't stupid (Score:3, Insightful)

    by zogger ( 617870 ) on Saturday July 05, 2003 @12:31AM (#6371015) Homepage Journal
    The economy is being blown out. The value of everything is dropping vis a vis what the current manipulated artificial currencies say they are worth. Sitting on daily de-valuing cash is pointless, they are taking the cash and running with it NOW before it's worth much less, that cash can be converted to more wealth-preserving assets. In a month or three, perhaps that same valuation in forms of digits would be worth much less when it's compared to tangibles. This is what the real high rollers around the planet are doing, so it's not surprising that microsoft management would be doing it. that their smaller shareholders get a piece of it they can't avoid, that's out of their hands, but the larger holders want OUT, they want to get into safer things now. This is a serious economic clue, of much more worth than most nightly business reports puffery.

  • what's a poor company to do? (Score:3, Interesting)

    by geoff lane ( 93738 ) on Saturday July 05, 2003 @01:54AM (#6371267)
    All that money and _nothing_ to buy :-)

    MS can't touch anything computer related because tada! instant anti-trust case. They can't just buy into another industry without tada! instant anti-trust case (using monopoly profits to buy into an industry isn't allowed.)

    Leave it in the bank? No way. Should the share price drop too far having a huge wad of money in the bank allows a hostile, leveraged buyout to be attempted. In addition share holders will start complaining that the money isn't being used to best advantage.

    Looks like a dividend is the only option.

    Unfortunately MS is going to face the same problem next year. They are too big for the market :-)

  • Crappy investment (Score:3, Interesting)

    by cdn-programmer ( 468978 ) <terr&terralogic,net> on Saturday July 05, 2003 @03:51AM (#6371554)
    I would not want to invest in M$. Microsoft has about $46 billion in cash apparently, but they also have more than 10 billion shares out there trading at a wee bit over $26 bux. This means if they liquidated their whole nest egg that they could not even offer a 2% rate of return.

    Furthermore they have precious little growth opportunities left. Anyone of us can do a straw pole... who is planning on upgrading their OS or M$ office suite any time soon?

    The computer world has been filled with random fads that generally crash and burn at a bewildering rate. Why should Microsoft be different.

    It might take years before Opensource software makes a real dent in the mass market - but it is inevitable that this paradigm shit will take place. When it happens M$ will probably not have a revenue model left and that will be the end of them.

    Personally I beleive there will still be opportunities for commercial software but I feel any opportunities will not likely include operating systems and system software. I don't think these opportunities will include office suites either.

    So pass the popcorn because the show will be interesting! I think the future is clear, yet I will admit that the time line is rather fuzzy.

    • Re:Crappy investment (Score:3, Interesting)

      by grimani ( 215677 )
      This is now the most retarded comment I have ever read.

      Your 2% rate of return argument makes no sense.

      First of all, the rate of return if you liquidated Microsoft is negative (-80% or so).

      This is because, when you cough up $25 for a share of Microsoft, you are only buying $5 in real assets (office chairs, cash, development computers, office buildings, etc.).

      In fact, in almost any company you invest, you are paying more than the hard assets of the company. By your argument, no company is worth investing

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