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Bridgestone to Spend $3.9 Billion to Expand Production

By Anna Mukai - Oct 24, 2011

(Corrects type of tires in second paragraph of story published Oct. 21 .)

Bridgestone Corp., the world's largest tiremaker, will spend a record 300 billion yen ($3.9 billion) next year to expand production to meet rising demand from emerging markets.

Bridgestone will build a factory in the U.S. to produce tires for construction and mining vehicles, and increase manufacturing capacity in China, Bridgestone Chief Financial Officer Akihiro Eto said today.

"In emerging markets right now, demand is topping supply," Eto said in Tokyo on the company's mid-term business plan from 2012 to 2016. "We plan to expand our capacity to meet demand as soon as possible."

Bridgestone and Michelin & Cie. are among tiremakers investing in new factories as rising automobile and aircraft sales in emerging markets spur demand. Global tire sales are expected to climb 50 percent in the decade to 2020, according to Michelin, the world's second-largest maker of the product.

Bridgestone fell 2.5 percent to 1,695 yen at the trading close in Tokyo. The benchmark Nikkei 225 Stock Average was little changed.

Emerging markets are expected to make up 30 percent of Bridgestone's fuel-efficient tire sales by 2016 from less than 20 percent now, Eto said. The company aims to boost overall annual sales to 3.6 trillion yen by 2012 and set capital spending at 250 billion yen a year until 2016, he said.

The targets are based on an exchange rate of 85 yen to the dollar.

Michelin, which already has four Chinese plants, said last month it will invest 75 million euros ($103 million) in a Chinese venture with Double Coin Holdings Ltd. (600623) and Shanghai Huayi Group Co.

Separately, Bridgestone President Shoshi Arakawa told reporters today that the company's facilities in Thailand haven't been flooded. Bridgestone is assessing the costs from disruptions to its Thai output, which are caused by shortages of materials and workers' inability to commute around flooded areas, he said.

Topics for Discussion

    Why is Bridgestone expanding plant capacity in China?

    What does Bridgestone's decision to build a plant to manufacture construction and mining equipment tires say about the company's expectations?

    Why are emerging markets considered to be the growth area for Bridgestone Corp.? 

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Microsoft Raises Its Dividend 25%, Reaching Upper End of Predicted Range

By Dina Bass - Sep 20, 2011

Microsoft Corp. (MSFT), the world's biggest software maker, raised its quarterly dividend 25 percent to 20 cents, providing investors with a payout at the upper end of forecasts.

The new dividend is a penny more the 19 cents a share projected by Bloomberg data and compares with the 18 cents to 20 cents estimated by Heather Bellini, an analyst at Goldman Sachs Group Inc. in New York. The change, announced in a statement today, boosts the yield to 2.97 percent from 2.37 percent.

Microsoft generally has a policy of boosting the dividend in line with operating income. While the increase exceeded the 13 percent growth in operating income in the past fiscal year, investors were seeking more, Bellini said. The company's cash and short-term investments surged 43 percent last year, and shareholders wanted a bigger piece of that hoard.

Microsoft's ability to return cash to shareholders is hampered by the fact that much of that money is held internationally and would require the company to pay taxes to bring it back into the country for the purpose of paying a larger dividend.

About $45 billion, or 85 percent of the company's cash and short-term investments, is held outside the U.S., the company said in a July 28 regulatory filing. Around half of annual cash flow from operations is generated abroad, Bellini estimated, which gives the company about $15 billion to $17 billion to spend on dividends and share repurchases this year.

Double It

Even so, Neil Herman, an analyst at Ticonderoga Securities LLC, suggested in an August report that the company should double its dividend in order to boost its share price. The shares, which have declined 3.3 percent this year, might surge past $35 with an increase of that magnitude, he wrote.

Shares of Microsoft, based in Redmond, Washington, fell 23 cents to $26.98 today on the Nasdaq Stock Market. They rose to $27.10 in late trading after the increase was announced.

Before today, Microsoft has paid out about 25 percent of earnings as dividends since starting the payments in 2003, according to Bloomberg data. Dividend-paying companies with similar market valuations to Microsoft are paying closer to 40 percent to 50 percent, the data show.

The company also said today it will continue its $40 billion stock buyback plan begun in 2008. The program, which expires in 2013, had about $12.2 billion remaining as of June 30, Microsoft said.

 Topics for Discussion

    How does increasing the dividend signal positive news about a company's future?

    Why are managers reluctant to signal a negative outlook with a dividend cut?

    How do Microsoft's international operations impact the company's dividend policy?

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