International Business Machines Corp. (IBM), on Tuesday, 29th May, 2007, bought back 8 per cent of its outstanding shares. The $12.5 billion worth of buy back were purchased from the market upfront. The company purchased 118.8 million shares with $1 billion in cash while $11.5 billion were borrowed funds from three banks. The loan taken from the banks, not named in the SEC filing, will see IBM’s interest payment soar in 2007 by $250 million.
With this repurchase, the company expects to boost the growth in its earning per share (EPS) for 2007 from 11 percent earlier to between 13 to 14 per cent.

IBM reported profits at $6.06 per share (excluding the profit from the sale of the company’s printer business) from continuing operations in the year 2006. The EPS is now slated to increase from about $6.85 to $6.91 in 2007.
Following the announcement, the company’s shares closed slightly higher on the New York Stock Exchange (NYSE). The share price is reported to have risen higher in the after-hours trading.

Earlier this month, IBM of Armonk, New York, had announced that it expected an 80 per cent rise in the earnings per share in the next three years. Stock buybacks, increased profitability in its services business and acquisitions, among other factors, was expected to fuel the rise in earnings per share.
Company sources said that Tuesday’s repurchase is part of a $15 billion buyback announced in April this year. Last month, the company announced that the total buyback since 1995 stood at about $79 billion of shares.