Risk & Compliance

Jumping on the Buyback Bandwagon

Following in the footsteps of corporate giants such as Nestle and Procter & Gamble, smaller companies are now making buyback offers.
Sarah JohnsonAugust 16, 2007

As the stock market continues to sweat out the dog days of August, more companies are joining the ranks of those buying back shares. On Wednesday, at least three repurchase plans were announced.

For example, storage-solutions company Network Appliance announced its intention to buy back up to $1 billion of its shares, in addition to previous authorizations remaining to buy back approximately $200 million of stock. The company made this announcement the same day CEO Dan Warmenhoven acknowledged his disappointment in the company’s first-quarter revenue of $689 million, which reflected a 14-percent decrease compared to the previous quarter. Earlier this month, he said the slow growth was due to a downturn in spending in his industry.

Other cases include Jones Lang LaSalle Inc., a $2 billion investment company that plans to repurchase up to 2 million shares of its stock; and United Stationers, a wholesale distributor with $4.5 billion in net sales that may purchase $200 million of its own stock in addition to the $32 million it has outstanding from a buyback program announced in May. In addition, travel company Expedia Inc. announced on Wednesday that it had recently purchased more than 25 million shares at a total cost of $725 million.

These plans follow similar announcements this summer from large companies, including Nestle SA, Procter & Gamble, Time Warner, and Marriott International. As CFO.com reported earlier this week, Nestle’s $21 billion buyback — the largest in its history — appeared to reflect the company’s retreat from acquisitions. To be sure, the current environment seems to be discouraging acquisitions and large financing agreements.

On the other hand, the slowing state of the market — largely blamed on the ongoing credit crunch — was cited by Compuware Corp. as the reason for pulling back on its buyback program. The IT company made the decision just over the last several days as the “conditions in the credit market worsened substantially,” said chairman and CEO Peter Karmanos. “Given these conditions, the company no longer believes it is prudent to borrow money to fund further buyback activity at this time.”