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corporate dominance | media criticism selection 2004

Microsoft's generosity motivated by fear of Kerry

"It's like Microsoft has grown up...They even seem friendlier these days."--Donna Jones, retired school administrator, quoted in AP article
With the American press heaping praise upon Microsoft for their maturity and unprecedented corporate generosity, leave it to a British paper to point out the painfully obvious.

 http://telegraph.co.uk/money/main.jhtml?xml=/money/2004/07/25/ccsikl25.xml&sSheet=/money/2004/07/25/ixcoms.html

Microsoft placed a special $3 dividend on their stock price, and will buyback $30 billion in shares. As the newspapers pointed out, Bill Gates would pocket over $3 billion from the deal, and Steve Ballmer (Harvard class of '74) would pocket just over $1 billion. But the American papers didn't point out that things would be much different if uncle Bush (Harvard class of '74) were not in office.

Uncle Bush was the inspiration behind lowering the personal tax rate on dividends from 35% to 15%, and John Kerry has promised to raise it back to 35% if elected. In that case, Gates $3 billion would be reduced by $600 million, and Ballmer's cut would be cut by nearly a quarter billion. Overall, that 20% difference would mean billions of dollars lost for Microsoft's shareholders, if the company waited until Kerry was president to do this deal, (and if Kerry kept his word).

In a sense Microsoft's move is encouraging--it shows that the Microsoft gang is pretty confident uncle Bush won't be back next year. On the other hand, Economy is due to receive a huge shot in the arm, and it seems to be more or less Bush's doing. Do Microsoft shareholders know this? Would that alter their view of the "war president"?

It's true that Microsoft didn't have to give anything back to its shareholders. They could have just bought another company, like Disney or Time Warner. But these type of mergers are getting harder to pull off, and the threat of Kerry being president would make it that much harder, maybe. Time was running out for Microsoft to cash in on the Bush 'tax cuts for billionaires' program.

The quote at top is from an article in Sunday's paper praising Microsoft for its maturity, and presenting Microsoft stock as a safe, conservative bet. The article is titled 'Once a bit risky, stock in Microsoft matures'. The double irony is that the stock price fell 3.3% last Friday.

 http://telegraph.co.uk/money/main.jhtml?xml=/money/2004/07/25/ccsikl25.xml&sSheet=/money/2004/07/25/ixcoms.html
The article can be found at... 27.Jul.2004 20:18

JR

Google News--headline 'Microsoft is being boringly adult with its $75bn'

This article too praises Microsoft for its maturity, but also reveals the heart of the matter.