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Microsoft's Ballmer: Too Much Cash a 'First-Class Problem'

Under pressure from Microsoft Corp. (MSFT) investors to return a portion of the company's $35 billion cash reserve and revive a flagging share price, Chief Executive Steve Ballmer on Wednesday defended the company's "first-class problem" of having too much cash.

Ballmer, speaking to investors at the Sanford C. Bernstein Strategic Decisions conference, said Microsoft prefers to have the cash on hand in order to take risks on new technology and other things important to the company's operations.

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"It is likely I will continue to have to discuss with you for many years why we have as much cash as we do," Ballmer said on a Web cast. "At the same time, I think it's fair to say we want to return cash to shareholders."

Ballmer noted that Microsoft has returned $87 billion in cash to shareholders since June 30, 2001, but said he understands shareholder wishes to see more of the company's cash through dividends and share buybacks.

Microsoft began paying a yearly dividend to shareholders in 2003 for the first time since it went public in 1986, and in 2004 paid out $32 billion in a special dividend of $3 a share.

"At the end of the day, the cash belongs to the investors. We are not going to blow that. We are not going to screw around with that," Ballmer said in a rare appearance at an investor conference.

Microsoft surprised investors in late April by announcing that it would sacrifice billions in profit next year to invest in new business areas. Analysts estimated that the company planned to spend $2 billion more than initial forecasts.

The share price fell on the news, marking the latest decline for a stock that has underperformed every major U.S. equity index since the start of 2002.

FOCUS ON MSN, OTHERS

Redmond, Washington-based Microsoft said the increased spending next year will be focused on strengthening its Internet arm MSN, improving its business worker software and its server and tools division.

"We don't want to miss big opportunities," Ballmer said. "So being a little bit more generous in R&D than a little less is a smart thing."

Microsoft is on the threshold of a series of significant new product launches headlined by the long-awaited release of its new Windows operating system, Vista, and an upgrade to its Office business software suite.

The company has targeted a November shipment of Windows Vista to large corporate customers and a January 2007 release for most consumers, but some analysts said Microsoft is unlikely to meet that deadline.

Ballmer said it was too early to draw conclusions about the readiness of Vista from feedback after last week's wide release of a second test version of the new Windows.

"We said what we had to say about when the thing's going to be delivered, but at the end of the day the priority has to be to complete with good quality," Ballmer said.

Shares of Microsoft were up 2 cents at $23.17 in morning trade on the Nasdaq. The shares are down 11 percent since the start of 2006.

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