Intel set $25 billion buyback, ups payout

Jim Finkle

BOSTON: Chipmaker Intel Corp. on Thursday said it plans to buy back as much as $25 billion in stock and said it will boost its dividend by 25 percent.

The two measures are part of an effort to boost the price of the world's biggest chipmaker's flagging stock, which trades at a discount to other chipmakers relative to expectations for future earnings.

"They're obviously looking at their share price," said ThinkEquity Partners analyst Eric Ross.

The announcement of the buyback, adding to some $15 billion in purchases of its own shares that it has made since the beginning of last year, and the dividend boost to 10 cents a share sent Intel stock up 25 cents, or 1 percent, to $25.05 by late morning.

Shares have fallen 8 percent over the past three months.

Intel shares are now trading for about 16 times next year's earnings forecast, based on Reuters Estimates.

Rival Advanced Micro Devices Inc. trades for about 31 times next year's profit forecast. Competitor Broadcom Corp.'s stock is valued at 27 times estimated earnings for 2006.

While Intel has been buying back shares since 1990, the board's latest buyback plan comes amid an increase in the pace of those purchases over the past few years.

In the first three quarters of this year, Intel repurchased over 300 million shares at a cost of approximately $7.5 billion. That was equal to last year's total of $7.5 billion, which had been a full-year record.

Altogether, Intel has repurchased some $49 billion in shares over the past 15 years.

The size of the buyback disclosed on Thursday is equal to about 17 percent of Intel's total market capitalization of $148 billion.

While the board's latest authorization gives company executives the discretion to buy up to $25 billion in Intel shares, the action doesn't require that the full amount be spent.

If the stock's value increases substantially before the full amount is spent, Intel could slow the pace of the buyback or halt it.