Abstract

By early 2004, Microsoft’s cash balance had crossed $50 billion. One persistent investor complaint against Microsoft has been its zero dividend policy. Microsoft has not paid dividends for 17 years. It believes in ploughing money back into its R&D (research and development). In part, due to increasing pressure from shareholders, in 2003 the company declared its first ever dividend for common stock. More recently, Microsoft has announced plans to pay back up to $75 billion of its cash to investors over a period of four years. This includes a one-time special dividend of $30 billion. The case outlines the evolution of Microsoft’s dividend policy and the circumstances leading to the huge dividend payment in July 2004. The case also outlines the possible repercussions of this payment for other tech companies such as Dell, Cisco, and Oracle.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

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Keywords

Microsoft, IBM, International Business Machines Corporation, Bill Gates, Steve Ballmer, HP, Hewlett-Packard, CISCO, Computer Information System Company, Annual dividend, Stock purchase programme, Dividend reinvestment, Form 1099, Buy back, Bill and Melinda Gates Foundation, US Bancorp asset management, Intel, Dividend policy