Microsoft on Monday announced a new stock buyback program, saying it would repurchase up to $40 billion worth of its shares through September 2013.
The company also announced plans to sweeten its quarterly dividend to 13 cents, up from the current 11 cents per share, as well as to float up to $6 billion in corporate debt. Part of those proceeds could be used for stock repurchases.
The news boosted the software giant's share price by 3 percent in morning trading, to around $26 per share. Microsoft recently completed a previous $40 billion share buy back.
Two views on the move:
Trip Chowdhry, tech industry analyst at Global Equities Research, thinks the plan is premature. He argues passionately that no big tech supplier is immune from the big hit the tech sector is about to take, as IT spending on tech gets pulled back.
Chowdhry believes Microsoft is moving way too quickly to buy shares at prices sure to be driven much lower. He is in the camp that believes the tech sector is about to crater, as ramifications of the financial markets meltdown play out. "If it was the right move, at the right time, Microsoft would have jumped $5 -- and that ain't happening," Chowdhry says.
The brain trust at Citi Investment Research Disclosures begs to differ. In a report released this morning, Citi analysts opine that Microsoft's new buyback plan stands to boost the software giant's anemic earnings per share, or EPS, a key benchmark investors watch.
Citi says Microsoft senior execs are "bewildered" as to why the company's EPS is among the lowest of major tech suppliers. Citi expects Microsoft to accelerate stock buybacks -- now that an outright Yahoo takeover appears to be dead -- at a pace that could boost Microsoft' EPS nicely over the next two years.
By Byron AcohidoPhoto: A scene from Microsoft's new "I'm a PC" commercials.
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