Microsoft's Dividend Policy

The US government had charged Microsoft with antitrust violations in 1998. An initial ruling to split Microsoft into two companies was struck down. Under a tentative settlement between the company and the US Justice Department, Microsoft agreed to uniformly license its Windows operating systems, not to offer exclusive contracts to manufacturers, and to allow competing software to be included with its operating systems.

Microsoft had also reached settlements with long-time rivals Netscape (paying the company about $750 million) and Sun (agreeing to pay the company about $1.6 billion in addition to royalty payments on certain technologies).

Microsoft hoped to position its operating systems, software, and services as a de facto standard for accessing, communicating, and doing business over the Internet.

One of the most profitable companies in the software industry, Microsoft's sustained levels of financial performance had been unmatched.

By early 2004, Microsoft's cash balance had crossed $50 billion. One persistent investor complaint against Microsoft was its zero dividend policy. Microsoft had not paid dividends for 17 years.