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"The story here isn't that they're doing something about all that money they have," Mr. Sherlund said. "It's that they're being big and bold in how they're choosing to spend it."

Microsoft announced its plans after the close of the markets. Shares of Microsoft rose 37 cents, to $28.32, at the close of the market. In after-hours trading, shares spiked more than 5 percent, to $29.91.

The one-time cash dividend, Mr. Sherlund said, provides "immediate gratification" for shareholders who have been restless over a stock price that has barely budged in the last couple of years, despite a modest rebound in technology stocks. At the same time, he noted, the company leaves itself "with a sizable war chest moving forward."

"Most companies hold debt," Mr. Sherlund said. "This is a company with all this excess cash. This in no way inhibits its future growth opportunity."

But because of its recent antitrust troubles, the company is limited in its ability to spend on acquisitions because of heightened scrutiny from the government.

Still, Steven A. Ballmer, Microsoft's chief executive, was bullish about growth in a conference call with analysts and reporters. "As I look out over the next several years," Mr. Ballmer said, "I'm confident we have some of the greatest dollar growth prospects of any company in the world. No doubt about it. Period." Mr. Ballmer stands to receive $1.2 billion in the one-time dividend.

Microsoft officials said the motivation for the announcement was the resolution of lawsuits and legal challenges against the company, many involving antitrust claims in both the United States and abroad, rather than pressures from investors.

"Over the past two years or so, we've been focused on resolving our legal issues from the past and creating stronger relationships within the industry," said Bradford L. Smith, the company's general counsel. On June 30, a federal appeals court handed Microsoft a convincing victory in ending its domestic antitrust problems, upholding the settlement the company reached with the government two years ago.

The company has also resolved three-quarters of the state class-action suits filed, Mr. Smith said. The company's appeal of a $603 million fine the European Commission imposed in March is still pending, "but at least we have a better sense of the known risk," Mr. Connors said.

In recent months, the company has also resolved several high-profile legal disputes with competitors, including Sun Microsystems, a settlement that cost Microsoft nearly $2 billion.

"We had committed to investors that once we had resolved these issues, we'd announce our plans," Mr. Connors said.

The company decided to make its announcement yesterday rather than waiting until tomorrow, when the company will issue its quarterly earnings results.

"There's already enough news and important analysis that analysts and investors are required to do" without this much-anticipated announcement, Mr. Connors said.

The plan, which the Microsoft board approved Tuesday morning, is subject to shareholder approval at the annual meeting in November.

"We had a lot of different scenarios we looked at," Mr. Connors said. "We decided this scenario is one that met the interests and inputs of all the different constituencies.

"I don't think you're going to see much opposition when you're talking about a $3-a-share one-time dividend," Mr. Sherlund said. "That works out to a 10 percent premium given where the stock price has been."

Mr. Connors said: "The special dividend satisfied the input we received from shareholders who wanted the cash. The buyback met the input of those who thought a large-scale buyback was the appropriate action for building value." As for that quarterly dividend increase, Mr. Connors said that was what "investors told us they wanted."

And under the tax law enacted last year, investors will be able to keep even more of their dividends in their pockets. The law cut the maximum tax rate on dividends to 15 percent, down from the maximum 35 percent that stockholders would pay on ordinary income.

The stock buyback will mean fewer shares outstanding, which will increase the earnings per share - a number that is all important on Wall Street.

"This is all things to all people," said Mr. di Bona, who added that he was by and large impressed with the company's three-part plan.

"Bearish people will say the increase in the dividend is an admission that the company has matured and sees limited growth in the future," Mr. di Bona said. "I vehemently disagree. I think all this reflects is recognition that Microsoft has created a business model that create more cash than anything we've ever seen before."