IBM Plots Another Share Buyback
By William M. Bulkeley
The Wall Street Journal
February 27, 2008
Corp. announced its second $15 billion stock-buyback plan in less than a year, boosting its share
price and igniting a stock-market rally.
The announcement helped convince investors that IBM, which had a strong fourth quarter, is
confident in its strategy and outlook and believes its stock is underpriced. IBM shares rose $4.30,
or 3.9%, to $114.38 in 4 p.m. composite trading on the New York Stock Exchange, leading a rally
that boosted the Dow Jones Industrial Average by nearly 1%.
Few companies have relied on share buybacks as much as IBM. The Armonk, N.Y., company has
spent $46.2 billion the last five years on repurchasing its shares — a sum equal to about 30% of its
current market capitalization, or stock-market value, and more than twice the $20 billion it spent on
acquisitions during that period.
The latest buyback comes as Samuel J. Palmisano enters his sixth year as chief executive officer.
During the early years of his tenure, IBM went through a rocky period of lowered forecasts and
divestitures of businesses including its disk-drive and personal-computer units. Until recently, its
stock was stuck at less than its level when Mr. Palmisano took over, while chief rival HewlettPackard Co. has seen a sharp rise in its share price.
IBM’s growing profits from an expanded line of software, steady services business and sales in
foreign markets have helped the company produce a lot of cash. Last year, it reported free cash
flow of $12.4 billion, and it had $16.1 billion in cash at the end of the year.
IBM said it expects to spend about $12.4 billion of the latest
authorized buyback amount during the current year. Funds will
come from operations. It said the reduction in shares will
increase its per-share earnings by five cents to at least $8.25 for
the current year, up at least 16% from 2007. It has forecast $10
to $11 a share in 2010.
"The willingness to make continued share buybacks speaks to
strong faith in the business model," said Thomas Smith, an
equity analyst with Standard & Poor’s who recommends the
stock. Andrew Neff, an analyst with Bear Stearns Cos., said, "We
like where they’re positioned, in big markets where they have a
compelling advantage." He said that IBM has been successful in
purchasing software companies and increasing their sales by
training its huge sales force to peddle the programs.
Last year, IBM spent $18.8 billion on stock buybacks, including a
$12.5 billion accelerated share repurchase in May for which it
borrowed money through a foreign subsidiary in order to avoid U.S. taxes. The Internal Revenue
Service prohibited further use of that technique, which was known as a "Killer B" because it was
designed to circumvent IRS Section 367 (b) covering U.S. tax on repatriated foreign earnings.
Despite the big gain in IBM shares yesterday, buybacks don’t have a very good recent record of
providing superior returns to shareholders and are sometimes criticized as poor uses of corporate
cash. S&P said that 423 members of the S&P 500-stock index did buybacks in the 18-month
period ended June 30, 2007, but only one-quarter of them, including IBM, outperformed the S&P
index through Sept. 30. Buybacks reached record-setting levels in the first half of last year.
Ed Barbini, an IBM spokesman, said the company isn’t stinting on investment in its operations and
has increased spending on research and development in all but one of the past five years. He
noted IBM also has been aggressively purchasing small companies, especially software makers.
The company raised its dividend 33% last year.
At 111papers.com, we value all our customers, and for that, always strive to ensure that we deliver the best top-quality content that we can. All the processes, from writing, formatting, editing, and submission is 100% original and detail-oriented. With us, you are, therefore, always guaranteed quality work by certified and experienced writing professionals. We take pride in the university homework help services that we provide our customers.
As the best homework help service in the world, 111 Papers ensures that all customers are completely satisfied with the finished product before disbursing payment. You are not obligated to pay for the final product if you aren’t 100% satisfied with the paper. We also provide a money-back guarantee if you don’t feel that your paper was written to your satisfaction. This guarantee is totally transparent and follows all the terms and conditions set by the company.Read more
All products that we deliver are guaranteed to be 100% original. We check for unoriginality on all orders delivered by our writers using the most advanced anti-plagiarism programs in the market. We, therefore, guarantee that all products that we submit to you are 100% original. We have a zero-tolerance policy for copied content. Thanks to our strict no plagiarized work rule, you can submit your homework to your professor without worrying.Read more
TThis is one of the most cherished courtesy services that we provide to help ensure that our customers are completely satisfied with our finished products. Delivering the best final product to our customers takes multiple inputs. 111papers.com prides itself on delivering the best university homework help services in the writing industry. And, in part, our free revision policy is how we do it. What’s more, all our revisions are 100% free without any strings attached.Read more
Client privacy is important to use. We know and understand just how important customers value their privacy and always want to safeguard their personal information. Thus, all the information that you share with us will always remain in safe custody. We will never disclose your personal information to any third party or sell your details to anyone. 111 Papers uses the most sophisticated, top-of-the-line security programs to ensure that our customers’ information is safe and secured.Read more
Placing your order with us means that you agree with the homework help service we provide. We, in turn, will endear to ensure that we do everything we can to deliver the most comprehensive finished product as per your requirements. We will also count on your cooperation to help us deliver on this mandate. Yes, we also need you to ensure that you have the highest-quality paper.Read more