Microsoft Puts 'Stock' in its Stock
Microsoft will be in a position to initiate a buy-back of its own stock next week, when a six-month waiting period ends following the purchase of Visio software by Microsoft. Analysts agree that this is a positive sign for Microsoft, which in the last year has been plagued by many troubles with regulators and antitrust.
Microsoft bought the Visio program in January 2000 for $1.5 billion in stock. Visio is a program used primarily for drawings and diagrams, organizational charts, flow charts, and site maps. The program was marketed to licensed holders of Microsoft Office earlier this year. It is standard practice for the SEC to rule that a company can't purchase its own stock for six months after making a major acquisition.
Now that the six-month waiting period has expired, Microsoft has the right to proceed with stock purchases. When a company buys back its own stock it is regarded as a positive sign because buybacks of stock indicate that the company's management believes the business outlook is good and that stock prices will increase. Buy-backs generally bring good news for shareholders too as per-share earnings can increase when the quantity of the company's outstanding shares are reduced.
Microsoft will wait until next week when its profit and loss figures are released before making a decision about buying back stock. If the stock continues to rise on its own, which it has been doing recently, the company may hold off on initiating a buy-back program.