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IBM in on buyback trend
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October 28, 1997: 12:32 p.m. ET
U.S. companies follow 'buy low, sell high' theory after market downturn
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NEW YORK (CNNfn) - A day after the U.S. stock market took a historic nosedive, IBM Tuesday demonstrated how some companies are cashing in on the downturn by announcing a $3.5 billion stock buyback.
Buybacks are a favorite strategy during market sell-offs to boost investor confidence and earnings per share, analysts say.
Announcements of such buybacks were common in the days following the Oct. 19, 1987, market crash, said Alan Ackerman, a market strategist with Fahnestock & Co.
"IBM's announcement today hopefully is a harbinger of things to come," Ackerman said. "Investors need to know there's a sense of value among market leaders. IBM stepped up to the plate, and the market seemed to have rallied on the news and inspired other investors."
IBM said it plans to buy back its shares "from time to time," depending on market conditions and at market prices.
IBM has spent about $16 billion on its own shares since 1995, including $1.6 billion in the third quarter.
The computer giant isn't alone. Financial services provider Advanta Corp. said Tuesday it will spend $750 million to $850 million in a stock repurchase plan over the next year.
The Dow Jones industrial average rallied in morning trading, up more than 100 points.
IBM stock, meanwhile, (IBM) was up 6-1/16 at 96-1/16 in late morning trading on the New York Stock Exchange.
Ackerman said companies use the profit from stock buybacks for new acquisitions.
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