IBM announced Tuesday it is expanding its
stock-buyback program by $15 billion, potentially reducing outstanding shares by 10%, and increasing its dividend from $0.30 to $0.40 a share. IBM said that as a result of the share repurchase, 2007 EPS growth will be 12%-14%, 1%-3% higher than previously expected. Treasurer Jesse Greene said IBM has been "very underleveraged" with only $700 million in core debt, and $10.8 billion in cash. He would not disclose how much new debt the company would take on to fund the buyback. Moody's and Standard & Poor's said the plan would not affect IBM's debt ratings, but Fitch Ratings placed IBM on Rating Watch Negative following the announcement. CEO Samuel J. Palmisano said the moves "underscore the strength of IBM's business model and our strategy" saying its fiscal strength, "gives us significant financial flexibility to use our capital to drive growth through investments in acquisitions and capital expenditures, and to increase returns to shareholders through dividends and stock repurchase." The company said it may complete a substantial portion of the repurchases during the next several months. Shares rose $3.28 (3.5%) to close at $98.49.
IBM announced Tuesday it is expanding its stock-buyback program by $15 billion, potentially reducing outstanding shares by 10%, and increasing its dividend from $0.30 to $0.40 a share. IBM said that as a result of the share repurchase, 2007 EPS growth will be 12%-14%, 1%-3% higher than previously expected. Treasurer Jesse Greene said IBM has been "very underleveraged" with only $700 million in core debt, and $10.8 billion in cash. He would not disclose how much new debt the company would take on to fund the buyback. Moody's and Standard & Poor's said the plan would not affect IBM's debt ratings, but Fitch Ratings placed IBM on Rating Watch Negative following the announcement. CEO Samuel J. Palmisano said the moves "underscore the strength of IBM's business model and our strategy" saying its fiscal strength, "gives us significant financial flexibility to use our capital to drive growth through investments in acquisitions and capital expenditures, and to increase returns to shareholders through dividends and stock repurchase." The company said it may complete a substantial portion of the repurchases during the next several months. Shares rose $3.28 (3.5%) to close at $98.49.
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