15-5 Dividends

15-5 Dividends - Microsoft has the Cash, and Holders...

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Microsoft has the Cash, and Holders suggest a Dividend Source: Wall Street Journal, 2 January 2002 It is tough out there in the technology business, with sales tanking and once-hot start-ups closing up shop. Then there is Microsoft, sitting atop $36 billion in cash and short-term securities. That's right, $36 billion. Its legal woes and recent investment losses aside, the Redmond, Wash., soft- ware company is an enviable cash machine -- and that has some investors and analysts urging Microsoft to stop hoarding its pennies and give more of them back to shareholders. In other words, they say, Mi- crosoft should concede it isn't growing as fast as it used to -- and go the way of Old Economy stalwarts like General Electric, which pays shareholders a dividend. The analysts proffer the same advice to Microsoft's cash-rich technology cousins, such as Cisco Systems and Oracle. In the past, stock dividends have been heresy to tech- nology highfliers like Microsoft, which worried that making a quarterly payout to shareholders would brand them as old and stodgy, instead of nimble and fast-growing. Microsoft Chief Executive Steve Ball- mer "historically has said no way" to the idea of a dividend, notes Paul Dravis, a fund manager for Dresdner RCM Global Investors in San Francisco. The $36 billion on hand at Microsoft as of Sept. 30, the latest figure available, far surpasses the cash on the balance sheet of any other U.S. corporation, ana- lysts say. GE counts about $8.8 billion in cash and equivalents, while International Business Machines has just over $4 billion. Microsoft's hoard can't sim- ply be "a rainy-day fund," says Patrick McGurn, a vice president at Institutional Shareholder Services, which advises institutional investors on various is- sues. "Because if it is, then they're expecting some-
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This note was uploaded on 05/03/2010 for the course ACCT 202 taught by Professor Yang during the Spring '10 term at UPenn.

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15-5 Dividends - Microsoft has the Cash, and Holders...

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