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Microsoft Corp.'s executives said on Tuesday the company had no plans to pay dividends from its $40.5 billion in cash holdings as long as the software giant faced the threat of further litigation.
At its annual shareholder's meeting in Bellevue, Washington, stakeholders in the world's largest company had a pointed question for executives: Will Microsoft, which has never paid dividends since going public in 1986, start paying out?
Microsoft won an endorsement from a federal judge last week of its antitrust settlement with the U.S. government, which imposed minor remedies on the software giant but left it largely free to enter new markets and keep the company intact.
"While the ruling on Friday was a positive, we still face some significant legal issues, and in light of those legal issues to date the board has determined it would not be appropriate to commit to a long-term program like a dividend until that's cleared," Microsoft Chief Financial Officer John Connors told shareholders at the company's annual meeting.
Some analysts have said that Microsoft will face increased pressure to use its cash to either buy back shares, pay dividends or step up acquisitions now that its antitrust settlement with the U.S. government has been cleared by federal court.
Up to now, Microsoft's shareholders have been willing to give up dividends in exchange for a rising share price and stock splits. But with the share price down by more than 15 percent so far this year while the cash balance grows, some are calling for better returns in the form of dividends.
Competitors, meanwhile, have vowed to continue their private lawsuits against the Microsoft, and the company is also facing antitrust scrutiny from the European Commission.
News of Microsoft's legal victory was barely out on Friday afternoon when Sun Microsystems Inc. loudly announced it would press ahead with its suit against its rival. Santa Clara, California-based Sun filed suit in March seeking more than $1 billion in damages and claiming its business was damaged by Microsoft's abusive monopoly, which impeded the use of Sun's Java software platform.
Sun's Java and Microsoft's .NET are competing architectures for the next generation of the Internet, especially for mobile and wireless uses.
SHAREHOLDER BALLOTS
Microsoft's shareholders re-elected the company's eight-member board and approved an annual employee stock purchase plan at Tuesday's meeting.
Two shareholder proposals were voted down, both of which had been opposed by the board.
A proposal by John Harrington called for Microsoft to adopt specific steps to prevent the abuse of human rights in China. The proposal, which required a majority to pass, garnered 7.5 percent of the votes.
Citizens Funds, a corporate advocacy group, also proposed that Microsoft limit the non-audit fees of its auditor to a quarter of its total compensation, in order to guarantee the financial independence of its auditor.
That measure was the voted down after gaining 9.1 percent of the vote.
Deloitte & Touche LLP served as Microsoft's auditor for its 2002 fiscal year ended last June, and was also retained for fiscal 2003.
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