Intel Taking on $6 Billion in Debt to Buy Back More Stock

Intel Corp. (NASDAQ: INTC) is said to now be looking at a $6 billion debt offering in three different tranches. The company used the “for general corporate purposes” explanation but it also said it would use the funds to buy back shares of its common stock. With close to $10.5 billion in cash and short-term investments and another $4.4 billion in long-term investments, Intel could easily declare a $15 billion buyback plan if it chooses to.

Intel is unlikely to spend all of this in short order. We already pointed out that Intel has spent billions and billions buying its shares. The problem is that Intel’s stock, even with a $99 billion valuation, is still down by about one-third from a 52-week high.

Intel shares are up 2.4% at $20.01 on the day. Perhaps Intel should be looking for a way to spend that capital to get a faster and stronger foot in the door than it has had so far. Either way, if dividend taxes are going to suddenly go from 15% to over 40% then we would expect for Intel to lower its dividend and spend more money buying back stock.

The wild card is always how much of that cash it holds is locked-up overseas where it would take a huge clip if repatriated.

JON C. OGG