Tags: ibm | buybacks | earnings

IBM Adds $7 Billion for Buybacks to Boost Per-Share Earnings

Tuesday, 25 Oct 2011 12:01 PM

International Business Machines Corp., the biggest computer-services provider, added $7 billion to its share-buyback plan to boost per-share earnings and investor returns.

The addition brings the size of the repurchase program to $12.2 billion, as IBM had $5.2 billion remaining of its previous repurchase authorization, according to a statement from the Armonk, New York-based company today. Last week, IBM said it had bought back $11.5 billion of stock this year.

“The buyback program, given their exceptional cash flow, is one of the key elements of continuing to grow their earnings” per share, said Louis Miscioscia, a Collins Stewart analyst in Boston, who has a “buy” rating on the stock.

Chief Executive Officer Sam Palmisano is using buybacks as he targets operating earnings of at least $20 a share by 2015, up from $13.35 the company projects for this year. IBM has spent more than $100 billion on dividends and buybacks since 2003, the year Palmisano became the chairman. He has also increased earnings by steering the company toward software and services.

The company has said it plans to spend $50 billion on buybacks through 2015. In the third quarter, the reduction in share count contributed 18 cents to earnings of $3.28 a share, which beat analysts’ estimates. IBM ended the third quarter with $11.3 billion in cash.

Dividend Increases

IBM also declared a quarterly dividend of 75 cents a share, payable on Dec. 10. IBM has increased its dividend every year for 16 years, bumping it to 75 cents in April. Since 2006, IBM has bumped the dividend up by 10 cents each year, except for in 2009, when the increase was halved amid the recession.

IBM fell 0.6 percent to $181.10 at 11:11 a.m. in New York. The shares had climbed 24 percent this year before today.

The buyback extension is in line with IBM’s repurchase strategy and was largely expected by investors, said Shebly Seyrafi, an analyst at FBN Securities in New York.

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