Microsoft Corp.'s shares bounced on Monday afternoon, following a Bloomberg News report that the technology company is considering selling debt to fund dividends and share buybacks. Ooh, dividends! Investors love them and Microsoft has the financial heft to keep them coming.
But there is no shortage of skeptics when it comes to Microsoft, a company that generates envious quantities of cash but whose share price and business foresight have been underperforming for years.
David Merkel, who writes The Aleph Blog, pointed out that investors shouldn't gravitate towards companies that seem more keen to drive up their share prices using financial tricks.
"So when I hear that Microsoft will borrow money to fund dividends and a buyback, I say, 'Why pay money for financial engineering? Better you should look for genuine organic growth,'" he said on his blog. "There is nothing good to be found in Microsoft, look elsewhere for value among tech companies."
Eddy Elfenbein at Crossing Wall Street is similarly scathing.
"Since [fiscal year]2006, Microsoft has spent over $78-billion (U.S.) on share buybacks and the stock has done nothing but go down," he said. "The company is currently in the middle of a $40-billion buyback program that runs through 2013. The other option is for Microsoft to spend its cash on acquisitions. Still, we're back to the company being a money manager more than a software firm. To quote Biggie Smalls, 'Mo Money, Mo Problems.'"