Wed Jul 21, 2004

NEW YORK (Reuters) - Microsoft Corp. (MSFT.O: Quote, Profile, Research) shares rose 3 percent on Wednesday after the world's largest software maker said it plans to return more than $75 billion to shareholders over the next four years.

The news is likely to be followed by a strong quarterly earnings report on Thursday, analysts said.

The company has been under pressure to return cash to shareholders as its sales growth has slowed. But some analysts do not think its business is maturing.

"We vehemently disagree with the bears' argument that this distribution plan reflects an admission of the maturation and end of growth for Microsoft," said Charlie Di Bona, an analyst with Sanford Bernstein. "To the contrary, we believe that the plan reflects an affirmation of the robustness of its business model."

Redmond, Washington-based Microsoft, which generates about $1 billion in cash per month, said that despite the payout, it would still have enough funds for research and acquisitions.

Rick Sherlund, an analyst with Goldman Sachs, said if Microsoft were to revisit its acquisition talks with SAP, it would still have $40 billion in cash and strategic investments, borrowing capacity and the option to use stock or raise additional capital.

Microsoft shares were up 92 cents to $29.24 in morning trade on Nasdaq, their highest level since September 2003.

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