Microsoft HP Share Buyback

Microsoft Corporation, the largest software company of the world is set to take advantage of the hopeless market crash and the rock bottom share prices of its company shares. The company plans to buy back up to $40 billion of its own company stock.

Not only that, Microsofy will lift its dividend and also issue commercial paper for the first time in the company's history.

Along with Microsoft Share Buyback, another PC giant Hewlett Packard HP is also going for the Share buyback. The HP board of directors approved a plan to repurchase up to $8 billion worth of its own stock.

Microsoft introduced a $2 billion commercial paper program and said it may issue as much as $6 billion of debt. Standard & Poor's and Moody's Investors Service assigned their top credit ratings to Microsoft.

Why do comapnies go for share buyback?
Companies go for share buyback for multiple reasons.
1) When the stock prices are at rock bottom (like they are presently), the companies can go for share buyback or share repurchase, so that they can get the stock for cheap
2) When the company wants to retain more control and ownership, so they go for buying back shares
3) To install confidence among the investors. When a company goes for share buyback, it means that the company management is confident that company is doing good and hence it is buying back the stocks since it knows that the prices are low and will appreciate in future

What is the effect of Share Buyback on Company Stock Price?
The Share Buyback announcement usually send positive signals to the market. Microsoft shares rose 86 cents, or 3.42 percent, to $26.02 on the Nasdaq after the announcement. H P shares rose 21 cents to $48.47 on the New York Stock Exchange.