Microsoft unveiled a second mammoth stock buyback of up to $40 billion (£21.6 billion), raised its dividend by 18 per cent and said its board has also approved taking on up to $6 billion in debt.

With shares in the group down by almost 30 per cent this year, partly weighed down by Microsoft's failed $47.5 billion bid for Yahoo, the group hopes the buyback will revive its flagging stock.

The buyback, which is equal to around 17 per cent of its $236 billion market cap, is set to run over the next five years. However, the company said some of the debt could be used to help buy shares, suggesting it might try to speed up the process.

It comes just as Microsoft completed a $40 billion share buyback, which it began in 2004.

Microsoft also announced it would raise the quarterly dividend to 13 cents from 11 cents last year and said its board of directors had approved taking on up to $6 billion in debt and up to $2 billion in short-term debt.

The news helped lift Microsoft's shares by 3.3 per cent, or 80 cents, to $26 dollars, at midday yesterday on Nasdaq.

Standard & Poor's gave Microsoft its highest possible credit rating yesterday, making the software giant the first company to get the AAA rating in a decade.

At the end of June this year, Microsoft was sitting on a cash mountain of $23.7 billion and has never been in debt in its 33-year history.

Analysts had suspected a buyback was on the cards. In July Chris Liddell, Microsoft's chief financial officer, told analysts the low stock price was “incredibly frustrating” and said a buyback “makes more sense than it ever has.”

The last AAA rating was assigned to Automatic Data Processing in 1998. Exxon Mobil, General Electric, Johnson & Johnson and Pfizer also have an AAA rating.

Nike, the sportswear maker, also said it plans to repurchase an additional $5 billion of its own shares over four years and would begin the new buyback once it has completed its current four-year, $3 billion program, which was approved in June 2006.

Hewlett-Packard, the computer manufacturer, said it would spend $8 billion buying back shares.

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