18 August, 2006

Math is Hard


I'm no financial analyst, and it shows. I didn't know when I made my post why there were so few shares purchased and what Microsoft was going to do with the extra dough they had left over after purchasing what shares they could.

MSFTextrememaker has some good follow-up, analysis and links to the recent share repurchase event. In short, people holding Microsoft stock didn't want to sell at $24.75 because they think the stock is going to go higher in the future and the $16.2 billion that wasn't spent on share repurchases has been added to future share buybacks.

For those of us holding Microsoft stock, let's hope that the next share repurchase also happens before the shares go long instead of short.


Today, Microsoft announced that they were repurchasing only $3.8 billion of the $20 billion worth of shares in the buyback program they announced earlier this month, and that the balance would be added to future buybacks authorized by the board. The corporate spin is a "just the facts" attitude.

This begs the question of: why so few shares?

Chris Liddell, Microsoft CFO, has been quoted as saying, "We create value by buying at prices that we think are very good."

Absent of leadership's explanation, we're left to speculate as to why so few shares were purchased. I'm no financial analyst, but it seems that either leadership thinks the stock is overpriced or they're banking on the shares falling again. If $24.75 isn't very good to repurchase at, what is? $22.00? $20.00? $15.00?

Or has that $16.2 billion that wasn't spent on shares been committed to some other projects?

It appears that I can only dream of a day why my leaders do what they say they are going to do and have the wisdom to pull the plug on foolish endeavors.

(And dare I even say it?)

Leaders like they have at Boeing.

The Lazy B has finally been eclipsed by the Lazy M. (More on this thread next week.)


  1. It's not Microsoft that decided they're only repurchasing $3.8b. Microsoft can only buyback $3.8b because not enough people took the tender offer to sell their stock back to Microsoft. This indicates that the price that Microsoft offered to buyback the shares was actually underpriced, not overpriced. Now that people realize that people aren't selling their shares for even $24.75, the stock is up 3% today.

  2. Or it could just be that nobody took us up on the tender offer and they're having to go back to the drawing board. That would mean that people might think that the stock is under valued and be looking for a big future and aren't quite ready to sell. That's my take.