Text 575, 122 rader
Skriven 2004-08-03 22:11:00 av Jeff Binkley (1:226/600)
Ärende: Microsoft
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If Microsoft were to pay this out in one year, it could boost the GDP by
almost 1% and add $11B in tax revenues.

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http://biz.yahoo.com/ibd/040803/general_1.html

Investor's Business Daily
Was Microsoft Payout A Hedge Against A Kerry Victory In Nov.?
Tuesday August 3, 7:00 pm ET
J. Bonasia


Microsoft's decision to return $75 billion to shareholders through dividends
and a stock buyback no doubt followed lengthy number-crunching.
Experts on Wall Street say election-year jitters may have played into the
decision as well.

One of President Bush's tax cuts, enacted last year, reduced the tax on
dividends to 15% through 2008. Democratic contender John Kerry has said that if
he's elected he may ratchet the rate back up to 35% for high-income earners.

Microsoft's management likely factored this more than doubling of the dividend
tax into its math, said Robert Willens, a tax analyst with Lehman Bros.

Microsoft's consultants probably rated Kerry an even bet to win the election,
he said.

"Other factors undoubtedly contributed, but I'm 100% convinced that the lower
rate was central to the decision for Microsoft (NasdaqNM:MSFT - News) to pay
out this dividend now," Willens said. "I feel there was a hedging of their bets
based on their timing."

Last month, Microsoft said it would buy back $30 billion in stock over four
years. The company also doubled its regular dividend and declared a special
one-time dividend of $3 a share.

As of June 30, Microsoft was sitting atop a mountain of more than $60 billion
in cash and short-term investments. Antsy shareholders had grown restless
waiting for the company to announce how it would use the money.

After mulling potential investments and acquisitions, cash-rich Microsoft was
wise to provide a return to investors, said Robert Barbera, chief economist of
brokerage firm ITG/Hoenig.

"If the potential for a Kerry victory is at least 50-50 and he has talked
publicly about making tax rollbacks if elected, then this makes sense," he
said.

Other analysts disagree. They say Microsoft was driven by larger factors than
protecting the after-tax earnings of its largest shareholders.

For one thing, Microsoft's growth has slowed. The payouts may help appease
investors disappointed in its stock performance.

The idea of Microsoft hedging against a Kerry victory is possible, but "pretty
speculative," said Matt Rosoff, an analyst with research firm Directions on
Microsoft.

The dividend follows the recent settlement of several antitrust and patent
lawsuits, noted Rosoff. He said years of litigation forced Microsoft to gird
against threats of huge fines or forced corporate restructuring moves.

Legal Settlements A Factor?

"I think the timing had to do mainly with the legal cases that are once and for
all settled," said Rosoff.

Microsoft denies basing its dividend on any potential changes in the White
House or tax laws after the election.

A spokeswoman said the board based its decision on the resolution of a number
of claims that "reduced much of the uncertainty around future legal risks."

Another reason to stash away cash would be to save it for a mega-merger. But
talks to buy software giant SAP (NYSE:SAP - News) stalled last year. SAP was
Microsoft's largest possible acquisition target, said Rosoff.

"There are not a lot of other companies for them to buy at that size," he said.
"So that's also a reason to not justify keeping so much cash on hand."

Besides, Republicans almost surely will keep control of the House after the
election, said Greg Valliere, chief political strategist of the Schwab
Washington Research Group. Thus, he believes, hiking dividend taxes is unlikely
even if Kerry wins.

Rep. Bill Thomas, R-Calif., conservative chairman of the House Ways and Means
Committee, almost surely would block such an increase, said Valliere.

"In our business, you have to hedge against all possible outcomes," he said.
"But in this case I feel virtually certain that this would never make it
through the House."

Microsoft founder and Chairman Bill Gates stands to reap $3 billion from the
special dividend, which is due Nov. 17. He reportedly plans to donate that sum
to the Bill & Melinda Gates Foundation. Rolling back dividend taxes to a 35%
rate would boost Gates' tax bill by $600 million.

Microsoft's dividend news sent ripples through the tech sector and beyond.
Although it's not the only big company boosting payouts to investors, its
decision may pressure more boards to act.

Independent directors of Intel (NasdaqNM:INTC - News) reportedly are demanding
a similar payout. The chipmaker, which has some $20 billion in cash and
investments, doubled its regular dividend from 2 cents to 4 cents at the start
of this year.

Cisco In The Money

Also in the spotlight is Cisco Systems (NasdaqNM:CSCO - News). It has $20
billion in cash and investments, but does not pay a dividend.

In May, Metro-Goldwyn-Mayer (NYSE:MGM - News) said it would pay a special
dividend of $1.89 billion, or $8 a share. Company officials credited MGM's
"track record of generating strong free cash flow" and its ability to do so in
the future.

Also in May, Regal Entertainment Group (NYSE:RGC - News) said it would pay a
special dividend of $5 a share.

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