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IBM Will Repurchase 5 Million of Its Shares

November 26, 1986|From Reuters

ARMONK, N.Y. — International Business Machines, the world's biggest computer company, said Tuesday that it will buy back about 5 million shares of common stock and a series of debentures in transactions valued at $1.1 billion.

While the amount of the shares to be bought was minor compared to IBM's share total, market analysts viewed the buybacks as having a positive psychological impact on the stock, indicating that the company viewed it as a good investment.

IBM said it will redeem all $500 million of its 10.5% debentures due July 15, 2015, at $1,093.60 per $1,000 face value. The redemption is set for Dec. 29.

The computer giant has completed the repurchase of 10 million shares that it said it would buy back under a program approved in May. It now has about 610 million shares outstanding. IBM said the repurchase of securities will be made from general corporate funds.

IBM's stock closed up $2.50 a share at $127.125 in heavy trading Tuesday on the New York Stock Exchange.

Companies sometimes repurchase shares of stock as a method of investing company cash, or to fund internal incentive programs. Repurchasing shares boosts a company's earnings per share because the total number outstanding is reduced, allowing more earnings per remaining share.

IBM stock tumbled to a 52-week low of $119 recently, after trading as high as $161.875 earlier this year. The slowdown of the capital goods sector of the economy, both in the United States and abroad, was largely blamed for the decline. But analysts have also questioned IBM's product mix, especially in mid-range computers.

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