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How does a Fortune 500 company caught in the lack of confidence hammering the stock markets put a rocket under its share price? Thin the herd.
Like conservationists killing off portions of a wildlife population to avoid famine or disease, Microsoft and Hewlett-Packard have killed off a number of their public shares, a run at improving the prospects for those that remain.
“Microsoft authorized a buyback of $40 billion in public shares and gave shareholders a raise — increasing the quarterly dividend by 18 percent to 13 cents per share.HP authorized an $8 billion stock buyback.“
Conventional wisdom says having fewer shares means higher earning per share and thus higher price per share.
Joe Wilcox at Microsoft Watch hypothesized that Microsoft is conspiring to win investor favor for tech. Microsoft also announced a new strategy designed to take market share for Windows from Unix and Linux among the booming HPC (high-performance computing) trend.
Joe writes: “In some ways, the $40 billion share buyback is a metaphor for buying back investors and, along with the server announcement, customers.”
Microsoft made the announcement the morning of Sept. 22 at an event on Wall Street.
With fewer mouths to feed, can Microsoft and HP secure a better future for remaining shares? Or was this a big expensive PR stunt?
At the very least, the Microsoft buyback may be a better expense than the $40 billion Microsoft intended to spend on Yahoo.
The early result at the closing bell Sept. 22:
“Microsoft closed up .25 percent at $25.40HP closed down 2.2 percent at $47.16.“