The $30 billion stock repurchase Microsoft started in 2004 will soon end, and angry shareholders have started to air their complaints that Microsoft should buy even more stock.
If it takes the addition of billions in debt, Microsoft should repurchase about 2 billion shares of stock and bolster its value in the market place. Doing so would cost Microsoft its $35 billion cash pile plus some $25 billion in debt.
The company’s stock price has been mostly flat for several years, trading at press time for $23.12. A Bloomberg report cited conflicting comments over such a buyback.
Joseph Rosenberg, chief investment strategist at New York-based Loews Corp, said that Microsoft CEO Steve Ballmer was “indifferent” to the stock price of the company. Rosenberg floated the idea of a $60 billion buyback.
Whitney Tilson of Tilson Funds thinks a $50 billion buyback over two years would be eye-catching. But Steve Neimeth of AIG SunAmerica Asset Management would rather see Microsoft part with about $15 billion from its cash for a buyback, and reinvest the rest.
Despite multi-billion dollar revenue streams, Microsoft, and to an extent, Yahoo, have seen their stock prices hover within certain narrow ranges. Google has been a market darling, followed obsessively as its stock price rose into the $400s before drifting downward into the $370s.
Google provides no financial guidance, and derives 99 percent of its revenue from a single source; online advertising. Microsoft has more diversity, but not the favor of investors.
Ballmer must decide whom a buyback would serve best. With its most recent quarter dropping nearly $11 billion in revenue onto the balance sheets, and substantial operating and net profit margins, it is difficult to foresee Microsoft going into debt for additional stock buybacks.
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David Utter is a staff writer for Murdok covering technology and business.
