Microsoft Corp. (MSFT) shares rose 3.5 percent Wednesday after the world's largest software maker said it would 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.

Investors are also looking forward to the company's annual meeting with financial analysts next week, where Microsoft has promised to spell out its strategy for future growth.

"With what to do with the cash no longer an issue, the attention now shifts to how strong Microsoft's business is," said Tom Berquist of Smith Barney Citigroshare, or $32 billion, buy back up to $30 billion of stock over the next four years, and double its annual dividend payment.

But the special $3 dividend did not translate into equivalent gains for its stock: Microsoft shares were up 68 cents to $29 in afternoon trading on the Nasdaq stock market.

Investors discounted the special dividend due to the significantly lower interest income Microsoft will receive after cutting its cash position roughly by half.

The company has been under pressure to return cash to shareholders as its sales growth has slowed over the last several years, and there has been speculation that its business is maturing.

But some analysts say Microsoft has plenty of room to grow, with a major Windows upgrade cycle expected to materialize in the next two years.

"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."

Goldman Sachs analyst Rick Sherland agreed: "CEO Steve Ballmer (search) emphasized on Tuesday ... that the company still has significant growth opportunities ahead of it and that (the) announcements should not be viewed as an admission of diminished growth prospects."

Sherland pointed to solid organic revenue growth of 10 percent and expected Xbox 2 (search) sales growth in fiscal 2006 and growth from Longhorn, the next version of Windows, in 2007 and beyond.

Redmond, Wash.-based Microsoft, which generates about $1 billion in cash per month, said that even after the special payout, it would have sufficient funds for research and acquisitions.

Di Bona noted that Microsoft spends $5 billion on research and development, takes care of sales, marketing and expenses, and still puts $12 billion in cash in the bank each year.

Sherland argued that 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 of using stock or raising additional capital.