They only increased the quarterly divident by $0.02 per share. The 2004 special one-time dividend was $3.00 per share. Without the buyback, Micosoft could repeat the $3.00 per share dividend with money to spare.
Granted, this is an over-simplification of what is going on. Microsoft authorized a $40 billion buyback but they probably won't buy back all $40 billion. This has the effect of inflating the price of shares beyond their true value.
The main people who win are here are the ones that would have used the dividend to buy more Microsoft shares (since a buyback effectively is a way of the company forcing you to buy more shares with your dividend, but with lower taxation and brokerage fees), and the ones that are were going to sell their Microsoft shares anyway.
Granted, this is an over-simplification of what is going on. Microsoft authorized a $40 billion buyback but they probably won't buy back all $40 billion. This has the effect of inflating the price of shares beyond their true value.
The main people who win are here are the ones that would have used the dividend to buy more Microsoft shares (since a buyback effectively is a way of the company forcing you to buy more shares with your dividend, but with lower taxation and brokerage fees), and the ones that are were going to sell their Microsoft shares anyway.