Dell Initiates $10 Billion Buyback

Dell (DELL) announced a $10 billion share buyback ahead of the company's annual shareholder meeting Tuesday; consensus expectations were for an $8 billion repurchase plan. The buyback will begin this week; Dell will dip into the $13 billion of cash it has on hand. "This is a significant event, especially for a company that's lost about 25 percent of its market value since October," said David Garrity, director of research at Dinosaur Securities. Last week, Dell announced third-quarter profits increased 27%, but failed to beat analyst expectations and said orders fell 6% in the U.S., a sign the company continues to lose market share to rivals, particularly Hewlett Packard (HPQ). The company has been undergoing a series of strategic changes to spur growth, but last week's report made it clear the company's improvement was "smaller and more gradual" than expected, Goldman Sachs analyst Laura Conigliaro said in a post-earnings note. Despite the announcement, shares fell 1.4% in Tuesday trading. "While the headline news of $10 billion may get attention, the pace is what really matters," UBS analyst Ben Reitzes wrote, adding the news was 'not necessarily a catalyst' for share growth.

Sources: Bloomberg, Wall Street Journal, Thomson Financial
Additional Reading: Looking to Buy More Dell
Earnings call transcript: Dell F3Q08 (Qtr End 11/2/07)

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Comments

[Julian Ivan...:]

"This is a significant event, especially for a company that's lost about 25 percent of its market value since October," "

Yes, I always think its a significant event when a company that's gone down the crapper chooses to waste ten billion Dollars buying back its own stock.

2007 Dec 04 12:48 PM