Microsoft's decision to dole out $32 billion in a one-time dividend is good news for the Fargo-Moorhead economy, a noted economist said Wednesday.
"It's going to be a boon for the community, generating spending for everything from restaurants to cars," said Sung Won Sohn, senior vice president and chief economist of Wells Fargo of Minneapolis.
Microsoft is a widely held stock in Fargo-Moorhead. The Redmond, Wash.-based software giant, after all, acquired Fargo's Great Plains several years ago.
Microsoft Business Solutions of Fargo today employs 966 people, most of them Microsoft stockholders. The stock also is a popular pick among rank-and-file investors in the region, according to local financial investment professionals.
"The impact of Microsoft on Fargo-Moorhead is not insignificant," Sohn said. "It is one of the communities that could benefit the most from this, right along with the state of Washington."
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Microsoft stockholders will receive their dividend payments of $3 per share in December.
The payout represents the largest dividend distribution in U.S. corporate history, according to Standard & Poors, the Wall Street-based stock tracing company.
It comes in conjunction with a $30 billion stock repurchase by Microsoft and the company's promise to double future dividend payments. All in all, it's not a bad time to own Microsoft stock.
Individual investors own approximately one-third of Microsoft. The remainder of the company is controlled within mutual funds or held by insiders such as chairman Bill Gates or even Fargo's Doug Burgum, Microsoft senior vice president who leads the company's Microsoft Business Solutions division.
Microsoft employees twice annually can purchase company stock at 85 percent of its value. They also build a stake in the company through stock incentive plans.
Microsoft employee Chris Lerum said Wednesday he hadn't decided whether to roll his $3-a-share windfall into existing accounts or take it out to enjoy having a little extra cash.
Lerum - a Blaine, Minn., native and University of North Dakota graduate - has been with Great Plains/Microsoft since 1991 and today manages a portion of Microsoft Business Solutions' technical support center.
He's been buying stock regularly under the company's purchase plan and also has built up some value through its stock awards program.
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"At first glance, this looks pretty attractive," Lerum said of Microsoft's dividend payout. "It might take a while before we can look at the overall picture. But I think overall the key executives are looking out for the interests of both the stockholders and the employees."
The fact that the dividend checks will hit his accounts in December gives him some time to think about what to do with the windfall.
"It could be a nice Christmas for some of my relatives," Lerum said.
All in all, it's not a bad time to be a Microsoft stockholder.
"We have it rated as a buy," said Brien Krank, portfolio manager with Smith Barney of Fargo.
Krank said Microsoft is a "top 10" stock choice among the portfolios he manages. "I do carry a large position with Microsoft among my clients."
He estimates that at least 60 percent of those clients can trace their investment in Microsoft back to Great Plains. Great Plains of Fargo was traded on the Nasdaq market until the company was acquired by Microsoft in April of 2001. The $1.1 billion stock swap was the largest acquisition in Microsoft's history.
"Some of my clients have large enough positions that they will lighten it at times or buy back, but they always maintain a core position," Krank said.
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Microsoft's decision to disburse its cash did not come as a surprise to money managers, Krank said. "Not when you see the cash build up, build up and build up," he said. It's only right that it be turned back to stockholders, "because that's whose money it is," he added.
Microsoft (ticker symbol MSFT on the Nasdaq market) stock closed at $28.86 a share Wednesday, up 54 cents in trading on the day.
Ross Almlie said Microsoft's dividend disbursement and stock buyback plan, if nothing else, puts Microsoft front and center in the news - and therefore keeps the company on the minds of investors.
"The uncertainty has been out there as to what the company was going to do with this pile of money," the president and owner of RDA Financial Advisors said. "Microsoft is one of those companies expected to grow all the time, and they kind of hit a place where things have been kind of flat."
Almlie said the dividend disbursement is hardly a sign that Microsoft is throwing in the towel as far as future ventures. The company still spends handsomely on research and development, he said.
"They're going to have some great technology. We just don't know what it is," Almlie said. "The one thing you know in this business is that you just don't bet against Microsoft."
Readers can reach Forum reporter Gerry Gilmour at (701) 241-5560
