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October 26, 2010, 4:14 PM EDT
By Katie Hoffmann
(Updates share price in sixth paragraph.)
Oct. 26 (Bloomberg) -- International Business Machines Corp. added $10 billion to a stock-buyback plan, signaling the world?s biggest computer-services provider will keep using cash to boost per-share earnings rather than on large acquisitions.
The move brings the amount authorized for repurchases by the board to $12.3 billion, Armonk, New York-based IBM said in a statement today. In April, it authorized $8 billion in buybacks.
Since taking over as chief executive officer in 2002, Sam Palmisano has spent more than $68 billion on buybacks, about 38 percent of IBM?s current market value. The company has said it plans to spend about $50 billion on buybacks in the next five years, compared with about $20 billion on acquisitions, as it aims to almost double operating earnings per share.
?It?s crucial to their long-term EPS objectives,? said Brian Marshall, an analyst at Gleacher & Co. in San Francisco, who rates the shares ?neutral? and doesn?t own them. ?They realize the fact that they are a big, mature tech company.?
The company plans to increase operating earnings per share to $20 by 2015, with about $2.80 coming from repurchases. The company had $11.1 billion in cash at the end of September.
IBM climbed 83 cents to $140.67 at 4 p.m. in New York Stock Exchange composite trading. The shares have added 7.5 percent this year.
Smaller Acquisitions
Palmisano has spent over $20 billion on more than 100 acquisitions since 2002. His largest purchase was business- management software maker Cognos Inc. at $5 billion. Last month, the company agreed to buy Netezza Corp. for $1.7 billion, his sixth deal that topped $1 billion.
The focus on buying smaller companies contrasts with competitors such as Hewlett-Packard Co., which has spent about $50 billion over the same span on about half as many deals.
Last month, Palmisano criticized the rival, saying HP has to pay too much for acquisitions because it cut back on research and development. IBM spent about $6 billion on research last year, double HP?s expenditure.
IBM plans to ask for additional buyback authorization at an April board meeting, according to the statement.
IBM?s per-share earnings have increased more than 10 percent every year since 2005, while sales growth hasn?t met that metric since 2003.
Repurchases last quarter decreased the number of shares by 5 percent, Chief Financial Officer Mark Loughridge said on the company?s quarterly earnings call this month. The decline, along with a sales increase, helped increase earnings per share by 18 percent to $2.82, he said.
--Editors: Ville Heiskanen, Peter Elstrom
To contact the reporter on this story: Katie Hoffmann in New York at khoffmann4@bloomberg.net
To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net.
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(Updates share price in sixth paragraph.)
Oct. 26 (Bloomberg) -- International Business Machines Corp. added $10 billion to a stock-buyback plan, signaling the world?s biggest computer-services provider will keep using cash to boost per-share earnings rather than on large acquisitions.
The move brings the amount authorized for repurchases by the board to $12.3 billion, Armonk, New York-based IBM said in a statement today. In April, it authorized $8 billion in buybacks.
Since taking over as chief executive officer in 2002, Sam Palmisano has spent more than $68 billion on buybacks, about 38 percent of IBM?s current market value. The company has said it plans to spend about $50 billion on buybacks in the next five years, compared with about $20 billion on acquisitions, as it aims to almost double operating earnings per share.
?It?s crucial to their long-term EPS objectives,? said Brian Marshall, an analyst at Gleacher & Co. in San Francisco, who rates the shares ?neutral? and doesn?t own them. ?They realize the fact that they are a big, mature tech company.?
The company plans to increase operating earnings per share to $20 by 2015, with about $2.80 coming from repurchases. The company had $11.1 billion in cash at the end of September.
IBM climbed 83 cents to $140.67 at 4 p.m. in New York Stock Exchange composite trading. The shares have added 7.5 percent this year.
Smaller Acquisitions
Palmisano has spent over $20 billion on more than 100 acquisitions since 2002. His largest purchase was business- management software maker Cognos Inc. at $5 billion. Last month, the company agreed to buy Netezza Corp. for $1.7 billion, his sixth deal that topped $1 billion.
The focus on buying smaller companies contrasts with competitors such as Hewlett-Packard Co., which has spent about $50 billion over the same span on about half as many deals.
Last month, Palmisano criticized the rival, saying HP has to pay too much for acquisitions because it cut back on research and development. IBM spent about $6 billion on research last year, double HP?s expenditure.
IBM plans to ask for additional buyback authorization at an April board meeting, according to the statement.
IBM?s per-share earnings have increased more than 10 percent every year since 2005, while sales growth hasn?t met that metric since 2003.
Repurchases last quarter decreased the number of shares by 5 percent, Chief Financial Officer Mark Loughridge said on the company?s quarterly earnings call this month. The decline, along with a sales increase, helped increase earnings per share by 18 percent to $2.82, he said.
--Editors: Ville Heiskanen, Peter Elstrom
To contact the reporter on this story: Katie Hoffmann in New York at khoffmann4@bloomberg.net
To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net.
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