Microsoft (MSFT), in an effort to revive the share price of its stock after a nearly 30% slump this year – has authorized its board of directors to repurchase $40 billion in stock and increase the co’s dividend to 18%.
Microsoft’s board also gave its approval on Monday for the co. to take out up to $6 billion in debt and the establishment of a $2 billion commercial paper program. This prompted Standard & Poor’s and Moody’s Investors Service to assign their top credit ratings to the software giant. It’s S&P’s first new ‘AAA’ rating in 10 years to a U.S. corporate issuer, and Moody’s first since fiscal ’02.
Microsoft is one of only six non-financial companies to receive an ‘AAA’ rating from the firms. The last ‘AAA’ was assigned to Automatic Data Processing Inc. (ADP) in October 1998. S&P also noted that in addition to the co’s size and scope of its operation, Microsoft’s dominant position, and its strong growth capability, has allowed it to maintain a level of financial conservatism that reflects very limited credit risk.
The buyback program indicates no big acquisition plans on the horizon for the Redmond-based software giant. Microsoft said it has returned about $115 billion in the last five years to shareholders through buybacks and dividends.
Meanwhile, Hewlett-Packard (HPQ), the world’s largest technology co. had its board of directors approve the authorization of an additional $8 billion for share repurchases. The new buyback plan is intended to manage the dilution created by shares issued under employee stock plans.
HP repurchased more than $1.5 billion worth of its shares in the third quarter and, as of July 31, 2008, had approx. $3.0 billion of repurchase remaining under the $8.0 billion repurchase approved by the board in November of last year. The co’s market value currently stands at $115.50 bln.