IBM plans to boost buy-backs by $5bn - Move signals re-acceleration of share repurchases

IBM plans to boost buy-backs by $5bn - Move signals re-acceleration of share repurchases
By Richard Waters in San Francisco
Copyright The Financial Times Limited 2009
Published: October 27 2009 19:23 | Last updated: October 27 2009 19:23
http://www.ft.com/cms/s/0/f1ffc754-c32b-11de-8eca-00144feab49a.html


IBM signalled its growing confidence in an early rebound for the technology sector as it revved up its share buy-back plans on Tuesday with the commitment of an extra $5bn.

Though it did not say how quickly it would spend the money, the extra allocation to the buy-back plan, on top of $4.2bn left over from an earlier board authorisation, appeared to point to a re-acceleration of share repurchases as customers grow more confident about spending money on tech again.

News of the buy-back lifted IBM’s stock on a day when other big tech stocks gave up some of their recent gains. The company’s shares were changing hands at $121 in early afternoon trading in New York, up $0.89.

IBM cut back sharply on share repurchases earlier this year as it took a cautious stance in the face of the global recession. The move came in spite of the group seeing its operating cashflow continue to rise, reaching a record of $3.4bn in the most recent quarter.

The change marked a sharp reversal from IBM’s decision to boost buy-backs since the middle of this decade, using them as its main way of rewarding shareholders. It used more than $37bn to buy back its own shares from 2006-2008.

In a sign of increased caution, the company has recently devoted more of its surplus cash to reducing its debt, repaying $4bn in the most recent quarter alone. In the first nine months of this year its stock repurchases fell to $4.4bn, down from the $9.8bn it repurchased in the same period of last year.

While big tech companies have come through the downturn in better financial shape than those in most other industries, a general caution has spread through the sector this year.

Other companies to reduce their share buy-backs markedly include Cisco, which bought back $3.6bn of its stock in the year to July, down from $10.4bn the year before. Microsoft repurchased $9.4bn of its shares in its latest fiscal year to the end of June, down from $12.5bn.

● IBM’s cash reserves were set to be boosted by $600m, following news on Tuesday that Dassault Systèmes, the French design software concern, had agreed to buy the part of the IBM software operations that was devoted to selling Dassault’s products.

The French company had relied on IBM to handle distribution of its products in some places, but Dassault said that in future it would have its own integrated global salesforce.