Analysts at Barclays Equity Research anticipate that Microsoft Corporation (NASDAQ:MSFT) will expand its cash return program, given the fact that its shares repurchase program is set to expire by the end of September, as well as the new involvement of activist hedge fund, ValueAct  Capital, headed by Jeff Ubben.

Microsoft new Logo

Microsoft and ValueAct Capital agreement

Earlier this month, Microsoft Corporation (NASDAQ:MSFT) and ValueAct Capital signed a cooperation agreement. The software giant agreed to offer a board seat to the activist hedge, which owns 57,750,000 shares of Microsoft.  Under the agreement, ValueAct’s president Mason Morfit plans to regularly meet with the management of Microsoft about important business issues. The hedge fund has the option to appoint him to the board of Microsoft.

Barclays analysts Raimo Lenschow, Chris Hogan, and David Wang believe that Microsoft Corporation (NASDAQ:MSFT) will return cash to shareholders by increasing its dividend and share repurchase program, higher than the annual $5 billion spent by the company over the past two years.

Monetizing strategy

In addition to a potential increase in cash returns, the analysts also expect the company to provide details regarding its monetization strategy on the transition of SaaS with Office 365. Lenschow, Hogan and Wang believe that the transition boosted the Microsoft Corporation’s (NASDAQ:MSFT) gains because customers will pay ~$100 annual subscription fee instead of paying an upfront license fee of ~$50 every 5 to 8 years.

According to the analysts, if Microsoft Corporation (NASDAQ:MSFT) is able to explain its cloud transition properly, investors would be able to understand that the company’s office division has a higher value. Based on their sum-of-the-parts analysis, its potential value is in the high $30’s.

Nokia acquisition

With regard to the recent acquisition of Microsoft Corporation (NASDAQ:MSFT), Lenschow and his fellow analysts believe that investors are still skeptical about the reason why the company is acquiring the Devices & Services businesses of Nokia Corporation (ADR) (NYSE:NOK).  According to the analysts, it is imperative for the management to “clearly articulate why a smartphone presence is critical to the long-term success of Office and Windows.”

The analysts noted that many long-only investors are uncertain regarding the new strategy of the company and its impact on Microsoft’s financial model. Microsoft Corporation is expected to announce these issues during the upcoming analyst day on September 19.