Microsoft announces $40 billion buy-back offer

Hewlett-Packard ($8 billion) and Nike ($5 billion) also unveil major stock repurchase programs. Microsoft CorpÔÇÖs plan to buy back its shares from investors, which will run until 2013, is said to be the biggest single buy-back plan in history. Analysts say the move is an attempt by the company to use its spare cash to prop up its share price, which has fallen nearly 30 percent this year, partly due to its failed $47.5 billion bid to acquire Internet portal Yahoo. The three stock repurchases counter the recent trend for companies to conserve cash to deal with the lagging economy and the chaos on Wall Street. All three companies have launched large buy-back programs in the past.Repurchasing shares enables a company to reduce the number of shares available to the public, thus boosting its earnings-per-share ratioÔÇöa major metric for financial performanceÔÇösince the total profit is divided among fewer shares. While buying back shares uses cash that might otherwise be invested in new products, marketing or other means of increasing revenue, it often leads to an increase in stock price, which puts more money in the hands of shareholders and company employees and executives whose compensation includes stock options.Microsoft, H-P and Nike claimed the buy-backs are part of the normal course of business, rather than being related to market volatility. H-P said its program is intended to counteract the dilution created by shares it issued for employee stock plans; Nike and Microsoft said their new repurchase programs are part of efforts to return value to shareholders.