Late Monday, VMware (NYSE: VMW) announced that it will acquire SpringSource, a privately held company. The deal carries a total value of $420 million, which will consist of $362 million in cash and equity along with $58 million in unvested stock and options. The deal is expected to close in the third quarter of the year.

The acquisition is believed to have been made in order to help VMW expand its management software in order to work with what is known as cloud computing services. Cloud computing is a service over the Internet where users have an external company run the applications.

Microsoft (NASDAQ: MSFT) is forgetting what has worked for it in recent years: lavishing cash on its shareholders.

The stock lost more than half its value between December 1999 and summer 2006, but has since easily outperformed the broad market. That's partly because of brisk sales. PC unit shipments have increased 10% a year for three years. Microsoft has a fresh operating system on the shelves in Vista, barely a year old. And while Apple's (NASDAQ: AAPL) clever "I'm a Mac" commercials have won many of us over, Microsoft still has a 90% share of the market. Also, the company has done a much better job of late protecting against overseas piracy. So sales for its fiscal year ending June 30 are expected to swell 18%.

But much of the stock's success is owed to a plan announced in summer 2004. It called for stuffing $75 billion in cash into the pockets of shareholders through dividends (including a plump $3 a share paid one time) and share repurchases. Repurchases, of course, increase earnings per share and tend to make remaining shares more valuable.

Apart from the rekindled growth, the two main things to like about Microsoft today are that it still produces heaps of cash and that its stock is still reasonably priced. The company's cash on hand has recently grown to $19 billion or $2 a share. Shares finished trading Thursday at around 18 times trailing earnings, a slight premium to the broad market's 16 times earnings, but one that's warranted considering the growth spurt.