Microsoft Corp. will sell up to $2 billion of its stock this year to Chinese buyers, the company said in a filing Wednesday.
The sale comes after the Redmond, Wash.-based software maker reported record revenue in the fourth quarter, driven by revenue from its cloud-computing division and its Surface Pro tablet line.
Microsoft’s shares were down $1.06, or 1.4%, to $36.40 in after-hours trading.
The company is still waiting to see how the government’s recent crackdown on the sale of overseas corporate and investment funds will impact its sales of shares.
“The impact of our recent crackdown is still very much a work in progress,” said Phil Schiller, Microsoft’s chief executive officer.
“We are committed to making our sales in China as easy and painless as possible.”
Microsoft said it will also sell about $2 million of its stake in the China-based China-listed Shanghai International Financial Group to a Chinese investment firm.
The deal is expected to close in the third quarter, Microsoft said.
Microsoft is not the first tech company to make moves to diversify its sales in a country where foreign companies are still banned from owning more than 10% of stock.
Apple Inc. and Microsoft Corp., both of which make mobile phones and computer software, have also sold shares to foreign investors in recent years.
But the sales of Microsoft’s stock have drawn the most scrutiny from analysts and investors, who say the sale signals the Chinese government is tightening its grip on the country’s tech industry.
Microsoft has been trying to diversifying its business to meet the changing needs of a fast-growing middle class in China.
The Chinese government has tried to restrict foreign investment in tech companies to encourage local tech companies.
But it has been struggling to impose new restrictions on overseas tech companies that can raise capital.
Analysts have said the Chinese tech sector will be particularly vulnerable to the crackdown, which comes amid a slowing economy.
“There are no other opportunities for Microsoft in China,” said Peter Fenton, chief economist at Nomura Securities in Singapore.
“They are still trying to create a new industry.”
Microsoft reported $1 billion in revenue in its first quarter, up from $938 million a year earlier.
It also said it sold $1 million in its own shares, a move that has helped the company balance its books as the government seeks to control its growth.
The shares rose 7% in after hours trading.
Shares of rival Google Inc. rose more than 3% in early trading.
Microsoft also said that it will be buying back shares of its debt, which will include $3 billion in debt that it said it plans to repay in a few months.
It said it expects to issue about $100 billion in shares in the coming years.