NEW YORK (Reuters) – IBM (IBM.N: Quote, Profile, Research)said on Tuesday its board authorized a $15 billion share buybackprogram that could boost 2008 earnings by up to 5 cents a share,sending its stock up more than 4 percent.
The news also pushed the overall U.S. stock market higher.International Business Machines Corp, which has a market capitalizationof roughly $150 billion, was by far the top driver of the Dowindustrials index.
"IBM is showing its confidence it can still generate a lot of cashin a difficult environment," said American Technology Research analystShaw Wu. "We are in a bear market, we are literally on the brink ofrecession — we actually might be in one already."
The new repurchase authorization comes after IBM reported strongfourth quarter results on January 17 and gave a 2008 outlook thattopped Wall Street expectations as growth abroad made up for the weakerU.S. economy.
Shares of the world’s largest computer services company have risenabout 13 percent since the results, which underscored investorexpectations that overseas services and software sales would help IBMthrough difficult times.
IBM said on Tuesday it now expects full-year earnings per share ofat least $8.25, or 16 percent year-on-year growth, as a result of thebuyback. In January, IBM had predicted 2008 earnings per share at $8.20to $8.30.
The average Wall Street forecast was for 2008 profit of $8.22 per share, according to Reuters Estimates.
"IBM’s profitable growth and consistently strong cash flow enablethe company to continue to return value to our shareholders," ChiefExecutive Samuel Palmisano said in a statement.
IBM said it expects to spend up to $12 billion on stock repurchasesin 2008, compared to $18.8 billion in 2007. It said it may buy sharesin the open market or in private deals, and expects to use cash fromoperations for the buybacks.
The new $15 billion authorization program adds to about $400 millionremaining at the end of February from a prior authorization, IBM said,adding that it did not expect to request board approval for more fundsfor buybacks in the next 12 months.
Shares of IBM were up 4.3 percent to $114.85 in early afternoontrading. The Dow Jones Industrial Average .DJI was up 1 percent, orabout 125 points, while the S&P information technology index was1.15 percent higher.
Shares of IBM rival Hewlett-Packard Co (HPQ.N: Quote, Profile, Research)rose 2.1 percent to $49.14. HP Chief Executive Mark Hurd told aninvestor conference on Tuesday that the computer and printer maker"feels good" about its earnings forecast, but declined to raise it.
(Reporting by Tiffany Wu in New York and Peter Henderson in Los Angeles, editing by Phil Berlowitz and Tim Dobbyn)
? Reuters 2008 All rights reserved