- Tuesday, 10 November 2009
- INQ Mobile
- RSS
Don't plan to sell your first chip - Bob Colwell, former Intel chief architect
Microsoft and HP snap up their own shares
MICROSOFT AND HP yesterday both announced separate plans to buy back billions of dollars in their own shares in order to appear cool and confident in the midst of the current financial storm.
The Vole’s board approved a $40 billion share buy-back and bumped up its quarterly dividend by 2 cents, to 13 cents a share. HP wasn’t quite as flash with its cash, coughing up only $8 billion to buy back shares.
"These announcements illustrate our confidence in the long-term growth of the company and our commitment to returning capital to our shareholders," gushed Volish CFO, Chris Liddell, in a statement.
The move seemed to have an immediate impact, with Mightysoft gaining 3.4 per cent on Wall Street to reach $26.02 a share. Shares in the Redmond giant have plummeted 29 per cent over the past year, and the firm has just finished an earlier repurchase of $40 billion in stock.
HP bought back the equivalent of 166 million shares to try and recove from its 4.1 per cent slump this year.
But buying back shares in order to make less of them available and thereby up the firm’s earnings-per-share ratio is a risky strategy, and there’s no guarantee it will bolster investor confidence long term.
It also means Microsoft and HP will have less cash to splash out on developing new products, research and marketing.
We share hope they now what they’re doing. µ
Share this:
ShareBusiness Intelligence Software
Customer Relationship Management (CRM)
Enterprise Accounting Software
Enterprise Resource Planning (ERP)
Enterprise Systems Management
HP will have plenty of cash for R&D, marketing, etc because even though they have mentioned how good their quarters have been they still hint at the possible lack of bonuses this year. That does not include sales mind you as they are so thoughtful to send us in Support, emails about what a wonderful vacation some of the sales team had. And don't forget the massive cuts IT and imaging department will take over the next 2-3 years. Yeah, I think they will be just fine on cash.
Hai, can we keep shoddy analysis out of a news story?

"But buying back shares in order to make less of them available and thereby up the firm’s earnings-per-share ratio is a risky strategy, and there’s no guarantee it will bolster investor confidence long term."

Basic corporate finance 101:
A company buys back shares only if the debt has for some reason become cheaper to the company based on an analysis of future dividends versus future interest rate payments, not to increase the (arbitrary) earnings per share ratio or to "bolster investor confidence".

The government's "bad debt" buyback plan will have the effect, if it actually goes through, of lowering interest rates on debt, making having more debt a better choice for many companies...