Since I have been blogging I have been calling on Microsoft to stop sitting on their cash pile and start returning it to investors. People have been calling for similar actions for years, and now Bernstein Research analyst Charles Di Bona has written a report calling on the company to both issue a special dividend and start a massive share buy back program.
So why I am so passionate about the company (which I am a shareholder in even though I am openly critical of their business practices) giving money back to shareholders? It is because we have a classical corporate finance problem where the managers of the company are tempted to make poor decisions on behalf of shareholders. The two best examples I can think of for Microsoft are their repeated failures to enter the hardware market (see my previous posting here) and their recent merger talks with SAP (previous posting here). Companies that aren't cash rich don't waste time and money entering these types of markets or considering these types of mergers.
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