Microsoft Corporation (MSFT) recently made a number of announcements related to management changes, increase in shareholder wealth and increase in operational efficiency.
Shares of Microsoft were up over 1% yesterday, touching a high of $46.85, before closing a notch lower at $46.76.
Management Shuffle
Microsoft announced the replacement of two of its departing board members Dave Marquardt and Dina Dublon with Teri List-Stoll, executive vice president and chief financial officer of Kraft Foods Group Inc. (KRFT) and W. Scharf, chief executive officer (CEO) of Visa Inc. (V). The two members will join the board from Oct 1, 2014.
Dave Marquardt and Dina Dublon decided not to seek re-election and step down after the annual shareholder meeting. Former CEO Steve Ballmer resigned in August from the board.
Dividend Hike
Microsoft also announced a dividend hike, reflecting its plan of utilizing free cash to enhance shareholder return. Microsoft increased its quarterly dividend by 11% to 31 cents per share from 28 cents, making it almost equal to 2.6% of its share price. The increased dividend will be paid on Dec 11, 2014, to stockholders of record on Nov 20.
Microsoft has continuously announced dividend hikes, since it initiated a regular quarterly dividend in 2004, thereby not only enhancing its shareholder return but also raising the market value of the stock. This not only helps in winning shareholder confidence but also increases investor enthusiasm for the shares.
Trimming Workforce
Microsoft will reportedly carry out a second round of layoffs later this week as a part of its plan to eliminate up to 18,000 jobs over the next year. In July, Microsoft announced massive job cuts in a strategic move to streamline the cost structure and boost the bottom line. Most of the eliminations related to the handset business that Microsoft acquired from Nokia (NOK).
At the time, Microsoft had nearly 127,000 employees worldwide, far more than its competitors, Apple (AAPL) and Google (GOOGL). Microsoft decided to lay off nearly 14% of its workforce, making this the biggest round of job cuts in its history. The last time Microsoft announced layoffs was in 2009, when 5% of its workforce was eliminated in order to deal with the recession.
Trimming its workforce will help Microsoft combat losses due to the persistent decline in worldwide PC sales as a result of the rising demand for smartphones and tablets among consumers and corporates. It will also help Microsoft to lower operating expenses.
To Conclude
The recent restructuring announcement, directional clarity and the decision to focus on fast-growing segments that are its strengths have increased optimism about Microsoft shares.
Microsoft shares carry a Zacks Rank #3 (Hold).
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