Microsoft May Buy Back Shares

Justin Kerr

What would you do with a multi billion dollar war chest? Well if your Microsoft, you try and buy up the largest search engine you can afford. But ever since Microsoft failed to convince the stubborn Jerry Yang to sell Yahoo, investors have been scratching their heads wondering, what will Microsoft do with all that money? A potential answer emerged last week in the San Francisco Chronicle with the news that Microsoft may spend as much as $20 billion to buy back its own shares within the next three months. Analysts believe this to be in response to its lagging share price which went from a 52 week high of $37.50 to as low as $24.87 by shareholders who worried Microsoft was overpaying for Yahoo. Investors may also be concerned that if buying Yahoo was plan a, plan b is something they should genuinely be worried about. Buying back shares should help push Microsoft’s stock price back up, and buy a bit of good will with shareholders. Tim Allen, analyst and portfolio manager at Wentworth, Hauser and Violich expressed relief that Microsoft was “not going to do something crazy”. The hope is that by reducing the number of shares in the market, earnings per share will increase and stock value will climb as a result. This doesn’t always happen, but is a pretty safe bet with a company like Microsoft that has a steady income stream. Microsoft shares closed down on Friday at $27.81.

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