Intel to spend $25 billion buying back stock

17 percent of shares in world's biggest computer chip-maker would be involved

November 11, 2005|By BLOOMBERG NEWS

SANTA CLARA, CALIF. -- Intel Corp., the world's biggest computer-chip maker, said yesterday that it plans to spend $25 billion buying back stock. That would be the second-largest share repurchase in the United States behind Microsoft Corp.'s record $30 billion buyback.

At current prices, the buyback would amount to about 17 percent of the company's stock. Intel also said it will increase its dividend by 25 percent, to 10 cents a share.

Intel and Microsoft, sitting on record piles of cash, are choosing to return money to shareholders rather than making acquisitions or investing in new ventures. Buying back shares might help Intel bolster its share price, which has dropped in three of the past five years.

"No business they could invest in is as good as buying their own stock," said Tim Allen, who helps manage $6.45 billion, including Intel shares, for Seattle-based Wentworth, Hauser & Violich. "Any business you get into is not going to be as good as the business you have, so it's easier to buy your own stock. It's about earnings, and that's what we like to hear."

This year, Intel expects to post its third straight year with sales growth of more than 10 percent, and the company is building smaller chips that lower production costs and is moving into new markets to spur growth. Chief Financial Officer Andy Bryant said in August that more buybacks and higher payouts were likely.

Intel's shares rose 24 cents to close at $25.24 yesterday on the Nasdaq stock market. They have added 7.4 percent this year after falling 27 percent in 2004.

Intel, with a market capitalization of $152 billion, has more than 6 billion shares outstanding. At the current share price, the repurchase would reduce the shares outstanding by 1 billion.

"Today's announcement signals our confidence in the growth, earnings and cash generating potential of our business," Chief Executive Officer Paul Otellini said in the statement.

Intel had cash and marketable securities of $13.9 billion at the end of the third quarter. The company added a dividend in 1992 and has paid out $5.8 billion in the past 52 quarters. Dividends will total $2 billion this year.

S&P 500 companies last year bought a record $197 billion of their own stock.

Microsoft, awash with more than $56 billion in cash, announced plans last year to return more than $75 billion to shareholders over four years through a $30 billion share buyback, a $32 billion one-time dividend and increased regular dividends.

Companies such as Time Warner Inc., which this month more than doubled its buyback to $12.5 billion, are buying stock to appease dissident shareholders.

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