Microsoft Agrees To $30B Stock Buyback

And, perhaps more important, it plans to buy back up to $30 billion worth of its own shares over a four-year period, the company said Tuesday. (See the Microsoft Web site for more details.)

In total, the company will disburse up to $75 billion of its fortune in the dividend and the stock repurchase.

"We will continue to make major investments across all our businesses and maintain our position as a leading innovator in the industry, but we can now also provide up to $75 billion in total value to shareholders over the next four years," Microsoft CEO Steve Ballmer said in a statement.

Microsoft's huge cash horde has truly been an embarrassment of riches for the Redmond, Wash., software behemoth. Investors and analysts have long pressured the company to open its purse strings, arguing that sitting on that much cash is hardly the best use of capital.

Last year the company, which had maintained it needed to keep plenty of cash to pay for potential legal liabilities and other eventualities, finally relented on the dividend last year. Over the past year, what had started out as an 8-cent-per-share quarterly payday grew to 16 cents per share.

The company's once-high-flying stock has languished in recent years, partly due to weakened IT spending, and partly due to Microsoft's growing maturity in an aging technology market, observers have said. Shareholders that had grown to expect faster growth rates renewed their calls for rewards.

Clearly, the company has been weighing its options, admitting earlier this year that it considered, then rejected, acquiring ERP giant SAP. That decision was partly driven by regulatory issues.

Historically, companies use buybacks to "increase their market capitalization when they have cash surplus and believe their stock is undervalued. But this is untraditional in its size," said Dana Gardner, analyst at Yankee Group. "A lot of companies would be quite pleased to have a $30 billion total market cap, never mind a buyback of such breadth."

For Steve Ballmer interview, see CRN.