IBM $15 Billion Buy Back

[Rubber Duck]

US shares reversed early falls to end up on Tuesday, buoyed by computer giant IBM announcing a $15bn (£7.5bn) share buyback.

The Dow Jones ended up 115 points to 12,685, while the Nasdaq added 18 points to 2,345.

Meanwhile, the Standard & Poor's 500 gained 10 points to 1,381.

The news from IBM overshadowed the latest weak economic data showing a further fall in consumer confidence and growth in housing foreclosures.


http://news.bbc.co.uk/1/hi/business/3663325.stm

Are Wall Street Analysts completely stupid? This mean that IBM has this money to spare because it intends to cut back heavily on new investment. If the rest of Corporate America follows suit then the US economy is going to be completely f*cked. Even if they don't, it is still a very clear signal as to where they think the economy is headed!

[TonyP]

IMB is borrowing $15B at LIBOR, but their estimated ROI is LIBOR+500bp

[Rubber Duck]

IMB is borrowing $15B at LIBOR, but their estimated ROI is LIBOR+500bp

This represents UNINVESTING Money in a way that supports its share price. The articles I read suggested that they are only flagging this intention and it was to be financed from internal cashflow, but it follows an already established pattern. Buy back make sense and it suggests that IBM have astute management, but it does not bode well for the American economy. It also suggests that IBM is expecting to pick up shares cheaply in the market later this year. This announcement will have come well in advanced of a phased and opportunistic buy-back. I guess from an investor's point of view, however, it is reassuring to know that they are not about to go tits up.