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Microsoft Corp. on Thursday said it would, for the first time, pay an annual dividend to shareholders. It also announced a two-for-one common stock split.
The annual dividend of $0.16 a share before the stock split ($0.08 after the split) will be payable on March 7 to those shareholders on record at the close of business on February 21. Shareholders will receive one additional common share for every share held on the record date of January 27, Microsoft said in a statement.
“Declaring a dividend demonstrates the boards confidence in the companys long-term growth opportunities and financial strength. We are especially pleased to be able to return profits to our shareholders, while maintaining our significant research and development efforts and satisfying our long-term capital requirements,” John Connors, Microsofts chief financial officer, said.
But Connors cautioned that while Microsoft is very optimistic about the future of the technology sector, it does not expect to see a significant upturn in global IT spending in the short term.
Connors said Microsoft does not see robust corporate demand from any large countries. “Our forecast assumes soft business demand for the second half of the year,” he said.
Microsoft is also introducing a Direct Stock Purchase Program and a Dividend Reinvestment Program, which offers new investors and current stockholders the option of receiving Microsofts annual dividend in cash or having it automatically reinvested.
This program will be administered by Mellon Investor Services and not Microsoft, Connors pointed out.
Microsoft on Thursday also reported a 10 percent rise in revenue to $8.54 billion for the second quarter to end-December compared with the same quarter a year earlier, partly on the back of its controversial Licensing 6.0 strategy, which came into effect last year.
Connors said the Redmond, Wash., software firm delivered solid results in every business despite a challenging global economic environment.
Operating income for the second quarter was $3.26 billion, which included a $210 million charge reflecting the companys estimate for costs related to resolving pending state antitrust and unfair competition class action lawsuits.
This compares to operating income of $2.84 billion reported in the second quarter of last year, which included a $660 million charge related to the companys estimate of the class action lawsuit costs.
Net income for the second quarter was $2.55 billion, including a $282 million after-tax charge for investment impairments and a $126 million one-time tax benefit relating to a favorable tax court ruling, compared to net income of $2.28 billion in the prior year.
Diluted earnings per share for the second quarter were $0.47, including a $0.03 charge related to the companys estimate of the class action lawsuit costs, a $0.05 charge for investment impairments, and a one-time tax benefit of $0.02.
This compares to earnings per share of $0.41 in the prior year, which included an $0.08 charge related to the companys estimate of the class action lawsuit costs.
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Microsoft in the second quarter launched a number of products and services, including MSN 8, the Tablet PC, Windows XP Media Center Edition, Xbox Live and a Windows-powered Smartphone.
Revenue from server platforms grew 12 percent in the second quarter, driven by demand from such customers as the Coca-Cola Company, Ernst & Young LLP and Siemens.
“Despite the overall weakness in IT spending, Microsoft SQL Server 2000 posted strong growth of over 40 percent, driven by strong demand for SQL Server Enterprise Edition among companies deploying mission-critical applications,” Connors said.
Microsoft management also said it expected revenue for the current quarter, to end-March, to be in the range of $7.7 billion to $7.8 billion, with operating income expected between $3.4 billion and $3.5 billion and diluted earnings per share to be either $0.47 or $0.48 for the quarter
For the full fiscal year to end-June 2003, Microsoft expects revenue of between $31.9 billion and $32.1 billion, operating income of $14.1 billion to $14.3 billion and diluted earnings per share of between $1.90 and $1.93, management said.