Microsoft's Dividend Policy
| Case Code: FINA011 Case Length: 16 Pages Period: 1975 - 2004 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.500 Organization: Microsoft Corporation Industry: Information Technology Countries: Global Themes: - |
Abstract Case Intro 1 Excerpts
"Cash is shareholder's money, so we need to either invest in new opportunities or return it to them."
- Steve Ballmer, CEO, Microsoft
Introduction
Microsoft, the world's number one software company, provided a variety of products and services including the ubiquitous Windows operating systems and Office software suite. The company had expanded into markets such as video game consoles, interactive television, and Internet access. With its core markets maturing, Microsoft was targeting services for growth, looking to transform its software applications into Web-based services for enterprises and consumers. While desktop applications and platforms remained the bread and butter business, Microsoft had moved into video game consoles, enterprise software, computer peripherals, software development tools, and Internet access services. 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). Despite the litigations that had plagued it in recent years, Microsoft had continued to forge ahead in its efforts to extend its core software products into Web-based services. 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.
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