Microsoft Announces $40 Billion Repurchase Program


Software giant Microsoft (NASDAQ: MSFT) yesterday announced a new $40 billion share repurchase program. The new share repurchase program follows the previous $40 billion share repurchase program, which is set to expire at the end of this month. The interesting fact about the new share repurchase program is that there is no set expiration date, and Microsoft has the luxury to repurchase its shares as and when it would deem fit to do so.  Considering the fact that Microsoft has significantly huge cash reserves, $77 billion at the end of June quarter, the company was under immense pressure to return cash to the shareholders. The pressure is more intense when you consider that the company’s attempted foray into hardware tanked with the Surface tablet being a big ‘flop.’ The company hasn’t been able to deliver any new products of late, apart from the updates to its windows and office suites. However Microsoft’s traditional stronghold has also come under immense pressure with rivals Google and Apple having launched Google Drive and iWork, which are absolutely free. Another trend working against the company is the fact that more and more people are now shifting to smartphones and tablets, where the windows phone O/S only manages to take a minority share from Google and Apple.

The combination of the above facts has put an immense pressure on the company to return money to its shareholders. Microsoft stock price remained more or less stable in yesterday’s trading, registering an increase of .39% against the NASDAQ’s gain of 0.75%. This can be attributed to the fact that the market was expecting this move from the company, and hence the announcement was already factored into the stock price, resulting only in a minor change in the stock price. In short Microsoft did not have the choice of not returning money to its shareholders. Hopefully the acquisition of Nokia will lead the company to a new path of growth in the smartphone segment to support its stagnating growth in its software business.

To see Microsoft’s latest stock price movement, click here (NASDAQ: MSFT)

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Disclaimer: We do not hold any stake in the aforesaid stocks. For detailed disclaimer, please click here.

Virendra Singh Chauhan Virendra Singh Chauhan   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

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