Could Microsoft Merely Be The First Buyback Domino?
The short answer to the headline is yes. Minutes after Microsoft's news to launch another $40 billion stock buyback and raise its dividend by 18 percent, Hewlett-Packard and Nike both announced major new buybacks of their own.
And all of this may serve as a clarion call to other cash rich tech companies to start sharing their wealth.
For Microsoft, such a move is an intriguing one: the last time this company embarked on such a major stock purchase, it served to buoy its shares but only for a short term. But it sent a message that while Microsoft might not be the most technologically innovative company, creativity was still alive and well in its finance office. And Wall Street likes what it's hearing, pushing shares up 6 percent on the news. Still a ways to go to get these shares back to where they were, but it's a key step in the right direction.
So who's next? We now have HP and an $8 billion buyback program. All eyes will turn to next to Apple, naturally. About $21 billion in cash, an enormous position for a company Apple's size. But the company's shares have dipped well off their highs and if they were a good deal at $200, they've got to be a phenomenal deal at $140. Would Apple take the step toward a dividend or a share buyback? Steve Jobs has been reluctant before, and is likely reluctant today.
- Microsoft Shares Leap on New Buyback, Dividend
- HP Board Authorizes Additional $8 Billion for Share Repurchases
- Sysco approves buyback of 20 million shares
I'm not sure the company needs it, but if it were to happen, it would dramatically pop these shares. The company wouldn't be doing so from a position of weakness. It would be doing so from a position of "market weakness," meaning Apple would be seizing on the macro forces that drove shares lower, and taking advantage of a good deal on its stock. In other words, if Apple were pondering such a move, now would be an ideal time to pull the trigger.
Likewise for other cash rich companies: Google,IBM, Cisco, even Research in Motionwith better than $2 billion in cash.
Now is the time: it would not be an admission of weakness by these companies, which is typically the worry when such announcements are made. "Our stock is so low, we need to take drastic action," is the message these announcements sometimes send.
Instead, the market madness of late is responsible for these dramatic plunges in many of these companies' shares. The message instead could be, "We see such a good deal right now. Shouldn't you?"
So who will be next? It's anyone's guess. But someone will be next.
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