Bertil E. Chappuis and Timothy M. Koller
When Microsoft announced, in July 2004, that it would tap its legendary cash reserves to return some $60 billion to shareholders, analysts immediately began scrambling to understand what the move might say about the software giant's strategy, its growth prospects, and the maturation of the entire hightechnology sector.
For John Connors, Microsoft's chief financial officer, however, the decision to pay a onetime special dividend amounting to about $30 billion and to buy back as much as $30 billion of the company's own shares over the next four years was merely the latest in a series of financial moves that have positioned it at the cutting edge of financial innovation in the high-tech industry. In 2002 Connors helped reconfigure Microsoft's financial-reporting processes around seven clearly defined business units, each with its own CFO and profit-and-loss statement, to offer investors a greater degree of organizational stability and transparency. The following year, the company surprised many people by announcing that it would stop compensating employees with stock options and would instead issue stock awards.
Connors believes that this combination of initiatives has helped build a stronger value culture at Microsoft while permitting management to focus on performance in the company's increasingly diverse business lines. In an interview at Microsoft's headquarters, in Redmond, Washington, he ...