Microsoft is to make use of its financial clout while Wall Street is in turmoil. The Financial Times reports the company plans to buy back another US$40bn (€27.05 billion) of its own stock (having recently completed the purchase of similar sized tranche over several years, according to The Wall Street Journal).
It will also venture into public debt markets for the first time. The new buy-back programme will run until 2013. It is being described by some as the biggest buy-back in history,
Analysts say Microsoft's strategy is to use its cash mountain to prop up its ailing share price, which has fallen almost 30% this year: in particular, share price was affected by the company's unsuccessful attempt to acquire Yahoo.
Nike (US$5 billion) and Hewlett-Packard (another US$8 billion, with US$3 billion remaining from a programme its board authorised last November) have also embarked on big scale share buy-backs.
Buying during the current crisis is considered a smart move because the shares are relatively cheap and it is also seen as proof of a company's confidence in its own business.
The FT's story states that as a first step, Standard & Poor's and Moody's assigned a triple-A credit rating to Microsoft, making it one of only five non-financial institutions to hold the top credit score.
The report also explained that Microsoft's plan to borrow on the capital markets, although it generates free cash flow each year of more than US$14 billion (€9.467 billion) after capital spending and dividend payments, is the latest step in a gradual overhaul of its financial strategy.
Or as the Wall Street Journal's report puts it, "The company's board has also authorized debt financings of up to US$6 billion. As part of this authorization, Microsoft has established a US$2 billion commercial paper program. The company plans to use the proceeds for general corporate purposes, including buybacks and financing for working capital."
In the past, Microsoft has been criticised for being overly conservative in its financial dealings.
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