ARMONK, N.Y. -- International Business Machines Corp. said yesterday that it plans to buy back as much as $3.5 billion of its stock, bolstering its shares at near-record levels on a day other computer stocks fell.
"It's a vote of confidence by management that the share price is inexpensive," said Phil Shettewi, managing partner at Loomis, Sayles & Co., whose fund owns 1 million shares of IBM.
The repurchase is the second this year and the fifth in less than two years for IBM, which said in April it would repurchase $2.5 billion in stock. IBM has bought a total of $9.7 billion of its shares since January 1995.
While buybacks sometimes are criticized by stockholders, who would rather see investments in products or businesses that increase competitiveness, IBM's $7 billion in cash lets it do both.
"Absolutely they are still investing," said analyst Steve Dube of Wasserstein Perella Securities. "Even putting money into the business, they have excess cash flow."
The world's largest computer maker dished out $4.74 billion for capital expenditures last year and spent $3.32 billion in the first three quarters of this year on research and development.
IBM also acquired software makers Edmark Corp. and Tivoli Systems Inc., as well as other small companies.
IBM's shares rose 25 cents to $157.88. The company's stock is trading at its highest point in more than nine years.
IBM joins several large U.S. companies that have unveiled buybacks as their stocks soared to record levels.
Pfizer Inc., Chase Manhattan Corp. and Microsoft Corp. have said in recent months they will repurchase shares. Each company has seen its shares hit records since the announcements.
IBM's move shows investors that the company believes its stock will rise further as earnings and sales increase in coming quarters, analysts said.
"If you think that you are going to have better times, you've got to buy back now," said analyst Barry Bosak of Smith Barney.
The authorization allows IBM to buy about 22 million shares at current prices, which would represent about 4 percent of its 522 million shares outstanding.
Pub Date: 11/27/96