Intel boosts buyback to lift shares

City A.M. Reporter
INTEL, the computer processor maker, has authorised another $10bn (£6.25bn) share buy back to try and reverse the pressure of recent months on its share price.

Intel earned record profits last year and its gross margins are at record levels, but the company's shares have suffered recently as investors have focused more on tablets and smartphones than on PCs.

Intel said its increased share buyback authorisation and its previously announced plan to increase dividends by 15 per cent reflect confidence in its business outlook, but some investors also saw a strategy to push up the company's stock.

"Clearly they had their best year in 2010 but still the stock has underperformed its peers. I can understand management being frustrated," said CLSA analyst Srini Pajjuri, who rates Intel's shares "underperform."

Pajjuri said that with gross margins hitting a record 67.5 per cent in the last quarter of 2010, some investors are concerned that they are more likely to decline than to improve further. Indeed, the company has forecast gross margins of around 64 per cent for the current quarter.

Intel's processors are the brains in 80 per cent of the world's PCs, but the company has yet to make its mark in the mobile gadgets that people increasingly use to surf the Web and update their social networking profiles.

On January 13, Intel posted better-than expected revenue and margins for the fourth quarter, but concerns about Intel's lack of success making mobile chips have hurt its stock.

The Philadelphia Semiconductor Index has surged around 32 per cent over the past 12 months, but Intel's shares have gained only five per cent in that time.

On Monday, shares of Intel were boosted by news of the increased buyback authorisation, rising 1.5 per cent to $21.13.

"Today's announcement signals confidence in our fundamental business strategies both today and looking forward," Paul Otellini, Intel president and chief executive, said in a statement.

The chipmaker will pay a quarterly dividend of 18.12 cents per share and the extension of its share buyback funds increased the amount available for repurchases to $14.2bn.