SEATTLE – Microsoft Corp.’s decision to distribute a substantial portion of its cash hoard back to shareholders signals that the software titan is unlikely to make any big acquisitions in the near future.
While other big corporations have gobbled up other companies to spur growth, Microsoft has largely relied on its own large stable of bright minds, and mostly made smaller purchases to complement its offerings.
As Microsoft searches for new revenue to keep profits growing, analysts expect the company to continue to rely on its in-house talent over its pocketbook.
It’s a strategy some say is designed to avoid further antitrust concerns. But in the rare cases Microsoft has made major purchases, the difficulty of integrating those companies into its distinctive corporate culture has almost proved more trouble than it’s worth.
Microsoft is still smarting from its decision several years ago to buy two business software companies, Great Plains and Navision, because it wanted to get deeper into the business of selling specialized products to small companies. The integration has been rocky, and Microsoft has not yet been able to beat the competition as it once hoped.
“It’s been a nightmare,” said Rob Enderle, principal analyst with the Enderle Group.
He believes that’s been one factor in Microsoft’s growing preference for relying on in-house expertise rather than going beyond its corporate walls.
“I think the industry is coming around to the idea that acquisitions should be a last resort,” Enderle said. “It’s not viewed as the fast path to a particular technology, because acquisitions are so incredibly hard to do.”
Microsoft, which has cash holdings of at least $56 billion and is growing steadily, said Tuesday it plans to pay a one-time dividend of $3 a share, at a cost of $32 billion, and will double its annual dividend to 32 cents a share. The Redmond-based company also said it plans to buy back as much as $30 billion of the company’s stock over the next four years.
In all, the company said it will return up to $75 billion to shareholders over the four years.
Microsoft said the payouts and buybacks would not affect the company’s spending on research and development. Chief executive Steve Ballmer told analysts and journalists the company would continue to “aggressively” fund research and development, searching for “breakthroughs across all our businesses.”
That’s important, since it’s those Microsoft minds that will create the revenue streams Microsoft will need now that the market for its dominant Windows operating system and Office software is growing saturated.
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