IBM's board of directors wants to give the company's top brass plenty of maneuvering room to engineer the earnings per share growth that they have promised Wall Street, and therefore has authorized the company to spend an additional $7bn on stock buybacks. When combined with $5.2bn in monies left over from IBM's previous stock …
Meanwhile back at the ranch....
UK employees get told no pay rises again this year.
Doesn't the Reg post this exact same story every time IBM announces a stock buyback? No matter what the share price is? I expect some of those previous buybacks turned out to be a not bad deal for shareholders.
What's wrong with stock buybacks?
When a company gets as big as IBM, it's much harder to use the money internally. Small acquisitions don't really move the earnings needle, and big acquisitions are few and far between -- does anybody think the Feds would have allowed IBM to buy Sun, for instance? -- so IBM tends to focus on acquisitions that bring in specific technology or expertise that can be multiplied by inclusion in established product lines.
There's also a limit on how much R&D you can usefully do. IBM still does a huge amount of basic research, but beyond a certain point it's diminishing returns. And I hope we all know it doesn't usually help to throw more programmers at established, staffed teams?
So instead, IBM returns the money to shareholders, some of whom will use the money to invest in other opportunities... which is exactly the way capitalism is supposed to work.
But hey, feel free to go on believing that you know how to run a multinational organization better than the CEO and board of directors of IBM.
Nothing's wrong with buybacks
...as long as you have ensured that you have sufficient investment in staff and R&D first. Unfortunately they have whittled down staff & pay to make the balance sheet look as good as possible with no long term thinking beyond 2015, after which Sam will disappear leaving a broken company with low morale and poor infrastructure.
So, how to explain ...
that in the most current quarter IBM and Apple had roughly the same revenue and gross margin, yet Apple spent $628 million on R&D while IBM spent $1.6 billion? Who exactly is investing in the future?
As Palmisano's comments point out, share buybacks are a way of returning profits to share holders. IBM also pays dividends - does that meet with The Register's view of how things should work or is that financial engineering as well? Perhaps IBM should send some of that to TPM so he could buy a clue.
Re: So, how to explain ...
Yes. I think dividends are a lovely thing.
Why are dividends "lovely" ...
and share buybacks "financial engineering"? In either case, management is returning profits to shareholders. Dividends are more direct, but incur immediate taxes, buybacks are indirect, but taxes are only assessed when you sell.
When you say 'Big Sam
I assume you mean Allardyce. Please be more specific in your headlines.
- Product round-up Ten excellent FREE PC apps to brighten your Windows
- Hi-torque tank engines: EXTREME car hacking with The Register
- Review What's MISSING on Amazon Fire Phone... and why it WON'T set the world alight
- Product round-up Trousers down for six of the best affordable Androids
- Why did it take antivirus giants YEARS to drill into super-scary Regin? Symantec responds...