IBM Boosts Outlook With $15 Billion Stock Buyback - InformationWeek

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Software // Enterprise Applications

IBM Boosts Outlook With $15 Billion Stock Buyback

As a result of the buyback, IBM said it expects to post earnings per share in 2008 of between $8.25 and $8.30.

IBM on Tuesday said its board had authorized $15 billion in stock repurchases in a move that should boost the company's 2008 earnings.

IBM said it would repurchase its shares on the open market or in private transactions, depending on market conditions, and that the purchases will be funded by cash from operations. The company plans to spend $12 billion of the authorized funds this year.

IBM chairman and CEO Sam Palmisano in a statement said the company's "profitable growth and consistently strong cash flow" enabled the buyback program.

As a result of the buyback, IBM said it expects to post earnings per share in 2008 of between $8.25 and $8.30. Previously, IBM had estimated that EPS for the year would fall between $8.20 and $8.30. Wall Street analysts will need to update their forecasts. As of Tuesday morning, most IBM watchers were expecting the company to post 2008 EPS of $8.22, according to a survey by Thomson Financial.

The news sparked in an increase in IBM's stock price of more than 4% Tuesday afternoon as traders pushed the company's shares over the $114 mark. IBM's announcement also helped lift the market as a whole for a time on Tuesday.

The Dow Jones Industrial Average was up 1% in mid-afternoon trading after opening the day in negative territory. The tech-heavy Nasdaq index was also up a point.

It's the second straight year in which IBM has announced a stock buyback program of more than $15 billion. The company still has $400 million left over from last year's authorization.

IBM said it doesn't expect to ask the board to approve any additional funds for stock buybacks within the next 12 months.

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