Microsoft is to spend $40bn (£25bn) buying back its own shares and raise its quarterly dividend 22% as the software giant moves to appease investors concerned that it is failing to capitalise on the smartphone boom.

The share repurchase is intended to increase the value of Microsoft stock by reducing the number of shares in issue. It replaces an existing $40bn repurchase programme which began five years ago, in September 2008, and is due to lapse this month. No deadline has been given for completion of the new buyback.

"We view this as a further indication that things are changing at Microsoft with respect to corporate governance that we believe could benefit shareholders over the next six to 12 months," Nomura Securities analyst Rick Sherlund said in a note.

The dividend will rise 5 cents on the previous quarter to 28 cents in December, costing the company an extra $400m per quarter. The payouts are intended to keep shareholders on board as Microsoft prepares for one of the most turbulent periods in its 38-year history.

A search is under way for a replacement for chief executive Steve Ballmer, who announced his retirement last month and days later negotiated the €5.4bn (£4.5bn) acquisition of the phone-making arm of Finnish group Nokia. Microsoft is hoping to emulate Apple's success by designing hardware and software under one roof.