In this April 2, 2014 file photo, Microsoft CEO Satya Nadella gestures during the keynote address of the Build Conference in San Francisco.Eric Risberg/The Associated Press
Microsoft Corp. increased its dividend by 11 per cent and is replacing two longtime board members when they retire this year, as Chief Executive Officer Satya Nadella puts his own stamp on the software maker.
The Redmond, Washington-based company said in a statement on its blog yesterday that it is raising its quarterly dividend by 3 cents (U.S.) to 31 cents a share. The two departing directors are Dave Marquardt and Dina Dublon, with Kraft Foods Group Inc. Chief Financial Officer Teri List-Stoll and Visa Inc. CEO Charles Scharf joining the board.
Nadella has been aggressive in making changes at Microsoft since he became CEO in February, replacing Steve Ballmer. Nadella has shuffled management, emphasized making Microsoft's software products available for all types of devices, and announced 18,000 job cuts. Earlier this week, Microsoft said it would buy Mojang AB, the maker of the Minecraft video game, for $2.5-billion, in Nadella's first deal as CEO.
"This is part of a shakeup and a shakeup is good," said Mark Moerdler, an analyst at Sanford C. Bernstein & Co., who rates the stock the equivalent of a buy.
The shifts have included sweeping out some veteran Microsoft executives and board members. Last month, Ballmer resigned from the board, ending more than three decades of direct involvement in the company. Marquardt, 65, a venture capitalist at August Capital, has served on Microsoft's board since 1981 and was an early investor in the software company. Dublon, 61, formerly CFO of JPMorgan Chase & Co., has been a Microsoft director since 2005.
Board Changes
Nadella has remade Microsoft's board in other ways over the past seven months. In July, the company named longtime wireless executive John Stanton to the board. In March, director Steve Luczo stepped down and in February, co-founder Bill Gates stepped aside as chairman to be replaced by lead independent director John Thompson. The board also added activist investor Mason Morfit of ValueAct Holdings LP to its ranks this year.
"The more you get people in who aren't tied to the old regime the better," Moerdler said.
Microsoft shares fell less than 1 per cent to $46.52 at the close in New York. The stock is up 24 per cent this year.
Nadella has also been working to increase Microsoft's appeal to investors. He has started appearing on the company's quarterly earnings calls, which Ballmer rarely did. On Nadella's first such call in April, he pledged to be more accountable to shareholders.
Microsoft typically increases the dividend annually and boosted it by 22 per cent last year to 28 cents a share. Yesterday's increase exceeded the 30-cent average estimate from analysts, according to data compiled by Bloomberg.
Microsoft's Transformation
"As we continue to focus on the company's transformation and the board continues to evaluate capital strategy options, this dividend increase is another step in our ongoing commitment to increase capital returns to shareholders," Microsoft CFO Amy Hood said in the statement.
Moerdler said he had been hoping for a larger dividend increase to return more cash to shareholders, but that this one was "OK for now."
Marquardt and Dublon will retire from the board at the end of their current term following the annual shareholder meeting in December, the company said. Microsoft's total number of board members will remain at 10 after Marquardt and Dublon leave.
October Start
Scharf and List-Stoll will start as Microsoft board members on Oct. 1. Visa's Scharf, 49, has been CEO of the credit-card company since November 2012 and previously worked at JPMorgan. List-Stoll, 51, worked at Procter & Gamble Co. before joining Kraft. She also serves on the board of Danaher Corp.
Microsoft will also roll out its second tranche of job cuts tomorrow, in a continuation of the 18,000 reductions that were unveiled in July, according to people familiar with the company's plans. Cuts will come from divisions across the company, said the people, who asked not to be identified because the details aren't public.