Intel Borrows Money To Buy Its Own Stock

The stock market had a nice reversal today. The Dow went from being down 30 points to being up 130. Shares of Apple ($AAPL) are taking a beating today. At one point, Apple was down $30 per share.

Citigroup ($C) is also in the news. The shares are up close to 6% on the news that the bank will lay off some 11,000 employees. I’m never impressed with these bold cost-cutting announcements. A good company should always be looking for ways to cut costs. Sadly, these big announcements usually get a big ovation from Wall Street.

This morning’s jobs report from ADP said that 118,000 jobs were created last month. The big report comes Friday from the government. Economists expect to see a gain of 93,000 jobs. Also, the ISM Services Index rose to 54.7 last month. That was better than expectations.

I see that Intel ($INTC) is going to the bond market to raise $6 billion. What’s interesting is that Intel is going to use the proceeds to buy back shares. This makes a lot of sense. Intel’s dividend currently yields 4.6%.

The bond offering is $3 billion in five-years at 1.35%, $1.5 billion of 10-years at 2.7%, $750 million of 20-years at 4% and $750 million of 30-years at 4.25%.

While this makes sense for Intel, I can’t say I’m a big fan of these moves. I’d much rather see Intel stick to its business and make money that way than by trying to goose a few pennies per share by financial engineering.

Posted by on December 5th, 2012 at 12:41 pm


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