Intel shares rally on back of stock buyback hopes

News 5 Dec, 2012

Chipmaker sets out debt sale plans.

Intel shares jumped more than 2 per cent on yesterday as the chipmaker sold $6 billion in bonds to fund stock buybacks and other business activities.

Intel sold the bonds in a range of maturities from five years to 30 years, according to IFR, a Thomson Reuters unit.

The Santa Clara-based firm said in a filing it plans to use the proceeds of the debt sale for general corporate purposes and for stock buybacks under its existing share authorisation.

In our view the raise will likely support increased buybacks.

"We believe the action should likely prove prudent given low debt borrowing costs," RBC analyst Doug Freedman said of the debt offer in a note to clients. "In our view the raise will likely support increased buybacks."

Intel's stock has dropped 18 per cent over the past year as investors worried about slow PC sales and the company's failure to expand into mobile gadgets.

In the September quarter, Intel spent $1.165 billion on stock buybacks, bringing its repurchases so far in 2012 to $3.765 billion.

At the end of that quarter, Intel had another $6.3 billion available for share repurchases under its existing authorisation.

Some investors have pointed to Intel's willingness to return cash to investors as a reason to own its stock. It paid $1.1 billion in dividends in the third quarter and its dividend yield stands at about 4.3 percent, according to Thomson Reuters data.

Intel shares rose 2.19 percent on Tuesday to settle at $19.97.

"The cost of money is relatively inexpensive and we have an excellent credit rating. It's sound financial planning," said Intel spokesman Chuck Mulloy.