Reuters Summit - Microsoft CFO sees tech mergers on rise

Microsoft CFO Peter Klein takes questions during a Reuters Global Technology Summit in New York May 14, 2010.

NEW YORK (Reuters) - More technology deals are on the way as the industry recovers from the recession, but Microsoft Corp is not poised to make a big deal soon, its chief financial officer told Reuters on Friday.

Potential acquisition targets felt that buyers weren't willing to pay high enough premiums during the market downturn, but that is starting to change, said Microsoft CFO Peter Klein at the Reuters Global Technology Summit in New York.

"The stock market has clearly rebounded, so you sort of feel like you're back to equilibrium," said Klein, who took over as CFO of the world's largest software company last November.

Microsoft, which has $39.7 billion in cash and short-term investments on its balance sheet, makes dozens of smaller deals each year, mostly under $250 million. But Klein said the company is unlikely to do a "mega-acquisition," two years after its failed $47.5 billion bid to buy Yahoo Inc.

"They are very hard to do," said Klein.

Tech deals are on the rise this year, with Hewlett-Packard Coslated to buy Palm Inc, and Germany's SAP agreeing to buy database software maker Sybase Inc for $5.8 billion.

Microsoft isn't interested in launching a counter offer for Sybase, said Klein, nor is it looking to buy SAP -- the world's top maker of business management software for large corporations -- after looking at such a deal about five years ago.

Microsoft constantly reviews potential deals in each of its five key business areas, said Klein.

"We try and think ahead, so that when things happen there is not this big fire drill -- 'Oh my God, somebody bought something.'"

Microsoft, which handed more than $30 billion to shareholders in a special dividend in 2004, has no plans to repeat such a payout.

"There is nothing under consideration now that is different than what we've been doing in the last several years," said Klein, asked about a special dividend.

Microsoft started paying an annual dividend in 2003 and moved to quarterly dividends the year after, as it looked to channel more money back to shareholders as growth rates moderated.

Taxes on dividends are set to return to about 40 percent next year as tax cuts enacted by the Bush administration expire.

"We want to get their (investors') feedback on dividends, buybacks, and how tax policy may effect how they feel about that," said Klein. "Many of our holders are tax-free, so that tax issue may not effect them enough, but it's absolutely something we're thinking about."

(For other news from the Reuters Global Technology Summit, click here)

(Additional reporting by Jim Finkle and Paul Thomasch, Editing by Tiffany Wu and Derek Caney)

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