Microsoft to issue debt, buy back $40 billion of its stock

SEATTLE — Chaos in the money markets gave Microsoft Corp. an opening Monday to announce it would take on debt for the first time, launch a new $40 billion stock buyback plan and raise its dividend.

The moves indicate that for all the credit problems plaguing the financial sector, cash-laden technology companies with good credit ratings are still borrowing money on favorable terms and otherwise enjoying flexibility.

The largest information-technology company, Hewlett-Packard Co., approved an $8 billion buyback plan Monday. And Intel Corp. Chairman Craig Barrett told The Associated Press that the chip maker — which boasted $8.4 billion in cash and $2.1 billion in debt at the end of the last quarter — was feeling no squeeze from the credit crunch.

"I don't see any slowdown in our technology investment or R&D investment or manufacturing investment going forward," he said. "When you've got 10, 15 billion dollars in your bank account, short-term credit is not a significant issue."

Microsoft, which benefits from having $23.7 billion in cash and short-term investments on hand as of June 30, historically has avoided taking on debt to fund day-to-day operations, acquisitions and stock buybacks, even as many of its peers, including IBM Corp. and Oracle Corp., have done so.

Oracle, for one, has accumulated $11.2 billion in debt in recent years while buying up dozens of its smaller rivals, while sitting on $13 billion in cash as of Aug. 31. The business software maker indicated recently that much of that money would go toward acquisitions or buybacks.

Microsoft did plan to borrow money for its $47.5 billion run at Yahoo Inc. this year, but the proposal fell through before the company issued any debt.

Now, as investors are growing increasingly risk-averse, blue-chip companies like Microsoft are finding interest rates on commercial paper — short-term loans that range from overnight to nine months — hovering around 2 percent. Finally the world's largest software maker decided it was time to borrow.

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