Microsoft launches $40bn share buyback

image captionMicrosoft is looking for a new chief executive to replace Steve Ballmer

Microsoft has announced a share buyback worth $40bn and will raise its dividend payout to shareholders by 22%.

The new share buyback replaces a previous scheme to repurchase shares which was launched in 2008 and expires this month.

The company's shares rose 1.4% after the announcement.

The buyback and raised dividend are a reward for shareholders who have seen a lacklustre performance by Microsoft's stock over recent years.

Since the beginning of 2010 shares have risen just 8%.

In a statement Microsoft said the quarterly dividend would be raised by 5 cents a share to $0.28 and the new share buyback will be open-ended, unlike the previous scheme which was launched in 2008 and expires this month.

"These actions reflect a continued commitment to returning cash to our shareholders," said Amy Hood, chief financial officer of Microsoft.

The announcement comes ahead of a meeting Microsoft is holding for financial analysts on Thursday.

Share buybacks are usually good for existing investors as they reduce the number of shares on the open market which should boost the value of available shares.

It has been an eventful few months for the software maker. It is looking for a new chief executive, after Steve Ballmer announced plans to step down, and earlier this month it paid $7.2bn to buy Nokia's mobile phone business.

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