Microsoft today unveiled plans to increase its share buyback programme by $16.2 billion (£8.6bn) to some $36 billion over the next five years after an unconventional tender offer for its own stock fell flat with investors.

The increase came as Microsoft said it succeeded in repurchasing only $3.8 billion worth of its shares in a tender offer priced at $24.75 a share this week.

The figure was well below the $20 billion ceiling the company had targeted when it announced the offer in July and the shortfall was today added to the conventional buy-back scheme.

Microsoft shares rose 32 cents, or 1.3 per cent, at $25.02 in early trading on Nasdaq.

At the end of its last financial year in June, the world's largest software company had $34.16 billion in cash and short-term investments.

Microsoft said earlier this year that its previous buyback plan covering $30 billion in stock had been completed.

The July buyback announcements came on the heels of a 24 per cent drop in fourth-quarter profits to $2.83 billion, or 28 cents a share, despite a 16 per cent increase in revenue to $11.8 billion.

Microsoft also surprised Wall Street earlier this year by announcing plans to invest an additional $2.7 billion in its business to counter the threat posed by rivals including Google and Yahoo.

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