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· Posted on
September 18, 2024

Microsoft is Excel-ing in its cash management with its $60 billion share buyback

After Microsoft generated $22 billion USD in net income last quarter, it's announced a share buyback of $60 billion USD for its shareholders.

What's the key learning?

  • Sometimes there can be such a thing as too much cash.
  • Now in Microsoft’s case, it has made so much money from its products and now needs to shell out the extra cash so that it’s not sitting idle on the balance sheet.
  • So, these three initiatives that Microsoft is implementing aims to balance things out, and hopefully, make its shareholders quite giddy.

👉 Background: Microsoft is one of the biggest companies globally. It became known for the Office suite (think: Word, Excel, Powerpoint) but has more recently become a leader in cloud computing and AI too.

👉 What happened: In the last quarter, Microsoft generated $22 billion USD in net income. It now has so much cash on hand, it's announced a share buyback of $60 billion USD for its shareholders.

👉 What else: On top of this, Microsoft will also be boosting its quarterly dividend by 10%. As a result of these moves, Microsoft’s shares rose 0.7%.

What's the key learning?

💡Companies are obliged to act in the best interest of shareholders. Holding bucket loads of cash isn’t usually the best way to do that.

💡As of June 2024, Microsoft had more than $75 billion USD in cash on hand. When a company has more cash than it needs, there are a few main levers it can pull:

  • It can invest that money into new initiatives like AI and its investment with ChatGPT
  • It can offer or increase the size of its dividend distributions - like Microsoft's 10% dividend increase
  • It can choose to buy back some of its shares from the public market

💡Microsoft’s not the only major tech company with excess cash to deploy. Apple and Nvidia have also announced buybacks worth billions of dollars this year. So in total, all three companies have a combined buyback program of up to $195 billion USD.

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