Wednesday, November 26, 2008

The method of Munchausen

The financial crisis forced shake world markets, dramatically changed the behavior of the leading IT-corporations. Those that have only recently boasted popularity of its shares to investors now enjoy the moment and quickly buy up their own podeshevevshie securities. And these actions are not devoid of meaning: in a situation of instability and the lack of interesting investment projects profitable companies to invest in themselves.

Microsoft has announced that it is ready to redeem their shares at U.S. $40 billion over five years (the stand about 17% of securities companies at their current price). In addition, the company increased its quarterly dividend of one share at 18% - up to 13 cents. According to the experts, all this shows that the direction Microsoft wants to return funds to shareholders, lost from the failed deal with Yahoo. Another, much more obvious goal - to increase the value of their assets during the financial crisis. After Announcement of new stock repurchase program analysts Standard & Poor's changed the rating on the shares of Microsoft AAA - the highest rating on the scale of S & P. Over the past 10 years, the company has not received such a rating. According to analysts, the paper software giant rated so highly in connection with the «strong competitive position» company and its «financial conservatism». However, not all start now. Back in 2004, Microsoft announced four years to spend up to $30 billion to purchase its own shares. Later, this amount increased to $40 billion Given the current size of the capitalization of Microsoft, it becomes clear that for $40 billion corporation may skupit approximately 17.4% of its shares. In total, over the past five years, Microsoft by redemption of shares and payment of dividends paid to shareholders of approximately $115 billion, but it now turns out, it was just the beginning. In a press release about the redemption of shares Microsoft Chief Financial Officer Chris Liddell said: «The last of the company demonstrated confidence in the long-term growth and our commitment to return capital to our shareholders». Indeed, before the NASDAQ trading session of September 22, Microsoft shares went up by 4.81% - to $26.37. Note, however, that since a year ago, Microsoft announced its proposal to acquire Internet company Yahoo for $47.5 billion, a software corporation has lost 22% of its value.

The world's largest manufacturer of personal computers - the company Hewlett-Packard - also agreed to add to your portfolio shares. For additional redemption board of directors of Hewlett-Packard has allocated $8 billion This will be the biggest purchase in the company's history. By the way, about $3 billion of that amount left from last year, when the plan for redemption was missed. Apparently, HP at $8 billion could buy 166 million of its shares. According to analysts, the time for redemption chosen well: market value of securities PC manufacturers (all) fell to a minimum.

The example Microsoft and Hewlett-Packard in the last two-three weeks, followed by many residents of Silicon Valley. Specialists attribute: Purchase of treasury shares, the company actually pays dividends to its shareholders. The fact is that in the U.S. buying shares taxed at a lower rate than the payment of dividends. It turns out that it is advantageous to shareholders to sell its corporate securities. Generally same diligence IT-companies to support their stock quotes using the procedure to reverse repurchase (buy back), until recently, determined the stability of the stock market in a crisis. NASDAQ Stock Exchange because more confident and kept others in the «black» days of September that the IT-companies to invest spare cash in shares. Theoretically buy back must show that managers believe the securities of the company undervalued. In fact, the company attempts to raise the stock market on their own are very similar to the actions of Baron Munchausen, vytaskivayuschego themselves from the swamp by the hair. While difficult to say happened or not. Nevertheless, it is reasonable behavior during the crisis. Another case - that the time «after the crisis» could not be less like the crisis itself. Rather, it was then purchased shares previously will gradually return to the market. And here they will meet stiff competition from those IT-companies that have previously expressed the desire to become public (that is to issue its own shares), but postponed the IPO indefinitely.

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