IBM Buyback Driving Shares

Investing

Published: October 31, 2012 7:02 am

International Business Machines Corp. (NYSE: IBM) has been closed for trading for the past two days, just like the rest of the stocks. On Tuesday the IT and hardware giant declared a regular quarterly cash dividend of $0.85 per common share. More important than its third payout at this rate was that IBM was adding $5 billion to its share repurchase program.

This $5 billion might not sound like much with a market cap near $220 billion, but this $5 billion is in addition to the $6.7 billion already available for buybacks as of the end of September 2012.

The long and short of the matter is that IBM now has about $11.7 billion for its stock repurchase program in total. That equates to about 5.3% of its outstanding shares. More importantly, IBM noted in its release that it expects to request additional share repurchase authorization at the April 2013 board meeting.

It is important to know that IBM is now just about entirely under Virginia Rometty, since Sam Palmisano has turned over the chairman role to her as well. It was interesting that IBM would release the news on a day that the market was closed. It was poorly timed by our count. Still, shares are surging higher so far today. The company was aiming to fend off any further selling in the stock.

IBM is not buying back so much stock that it is effectively sucking up its entire free float. It is, however, trying to show that the nearly 10% sell-off seen so far is enough. IBM shares closed at $193.27 on Friday and shares are indicated up above $195 so far in early indications on Wednesday. Its 52-week range is $177.06 to $211.79. As a reminder, IBM is the largest DJIA component by far.

JON C. OGG

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