1 2 Expecting The Stock Price example essay topic

Why MICROSOFT decided to pay dividends in 2003? 1.1 The company might see itself stepping in! SS Maturity Stage!" - Harder to grow, revenue growth slide down Investors buy stock for one of two reasons; either it will grow in value or pay a dividend. If a company stops growing, stockholders will demand a dividend.

If they don't get it, they will sell their stock. In the history, Microsoft enjoyed incredible growth, so dividend was unnecessary. Recent Microsoft dividends may tell us that the company has ended its growth phase and is now a 'mature' company. - More competitions from Open source like Linux and open office Windows and Office continue to supply most of Microsoft's profit. But that profit is being squeezed as more and more companies are using Linux servers and even Linux desktops.

For example, China is developing its own OS (Operating System) and planning to use for the whole country (their intention is to keep Microsoft away from the country). The company has been forced to slash prices for some key customers to avoid large scale defections, which leads to difficulties to locate the right price because high price may reduce the market share, but low price to compete against open source may reduce its core revenue. 1.2 Expecting the stock price will increase after dividends paid - Investors can buy more shares Experts say most investors will also likely use the extra cash to buy more shares. And there's no guarantee the investors will spend money in the economy.

Indeed, most investors will probably reinvest it or keep it in a cash account at their brokerage. - Stocks buyback policy from Microsoft itself Even if Microsoft use! SS Optimal Distribution Policy!" in which there is a balance between cash dividends (around 32 billions USD) and stock repurchase (around 30 billions USD). This may affect the decrease in stock price a little while after the announcement of dividend payout, however investors still hope for the rising price in the future. 1.3 The company reserves the great amount of cash liquidity As we can see from the article that Microsoft can pay around 32 billions USD for cash dividend, 30 billions USD for stocks repurchase and another 3 billions USD, for the goodness, to Bill & Melinda Gates foundation. Agree / Disagree with the decision, explain why?

AGREE because:" I As the company is reaching the maturity stage, dividend payout is another option instead of company growth only"I 30 billion USD buy back will contribute to keep the stock value up and make investors happy"I Forcing Microsoft to grow further in other segment as well For example; 1. Product development needed for MSN (instant messaging) & Xbox (game player) 2. Cable investment, basic research (according to the article) 3. Other Microsoft solution; which could be divided into two kinds 3.1 B 2 S e.g. smart home, smart life (software developed to use with household appliances such as the refrigerator that can tell us what is the current temperature and humidity) 3.2 B 2 B which Microsoft & its partners are selling like! SS Sharepoint Portal Server!" which provides the intranet (portal website) to a company by granting authority to those who can post, edit, and delete the content in the website. This benefits the company that provides 1 computer to 1 employee can share all information through this website.

Another one is! SS Mobility Solution!" which allows the businessmen who travel frequently. By synchronize the important information they have in the PC with the device such as Palm, Smart phone etc". I Ethical reason; satisfying investor cash need, signaling the further growth of company (confirming the investors) "I Illustrate high liquidity, profitability of firm (because it has sufficient amount of net income to pay cash dividend).