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IBM and buybacks

IBM announced it expects to spend $12 billion on buybacks this year. While that is one of the largest announcements, it is an authorization to buy, not a buy. That said, over the last year and a half many companies have issued statements of intent similar to IBMs, with practically all of them following through. IBM does currently hold the record for actual quarterly buybacks at $15.7B (Q2,’07), and ranks third in buybacks ($34.3B) over the past three years. The 10Ks are coming in and at this point the Q4 buyback numbers are ahead of my $139 billion estimate, which considering that the Financials have pulled back, speaks to the strength and depth of the buybacks.

For 2008, I expect buybacks to remain active for the non-Financial issues. They still have excess cash of $600 billion that equates to 65 weeks of net income, investors still favor them, EPS are increased the quarter they are purchased and, based on the schedule of expiring employee options (many of which date back years) and the current stock prices, it will be a busy year for option exercising