UPDATE: Seagate Adds $1 Billion To Stock Buyback, Raises Dividend
26 Gennaio 2012 - 11:35PM
Dow Jones News
Seagate Technology PLC (STX) added $1 billion to its stock
buyback plan and raised its quarterly dividend by 39%, joining a
long list of companies digging into their cash holdings and
returning value to shareholders.
"These actions by the board demonstrate our ongoing commitment
to maximize shareholder value," Chief Executive Steve Luczo said.
"The board and the management team remain confident in the
company's ability to maintain a strong balance sheet and sustain
exceptional cash generation from the business."
Shares, up 45% over the past 12 months through Thursday's close,
gained 3% after hours, to $20.40.
While the hard-disk drive industry was hurt by severe flooding
in Thailand, the facilities of Seagate remained intact, giving the
company an advantage over rival Western Digital Corp. (WDC) and
allowing it to benefit from higher pricing and longer-term
contracts with customers. Seagate, which reports fiscal
second-quarter results next week, last month lifted its revenue
outlook for the fiscal second and third quarters.
Seagate and other makers of disk drives have shared the negative
fallout from the boom in sales of Apple Inc.'s (AAPL) iPad and
other tablet computers, which store data on chips called flash
memory rather than on magnetic disks. The new devices are believed
to have hurt sales growth of consumer laptop computers, which are
major users of disk drives.
Seagate had canceled its dividend in early 2009 as a result of
the recession and declining demand for its products. The company
restarted its quarterly dividend in April of last year, saying it
reflected the strength of its balance sheet and confidence in the
ability to generate free cash flow on a sustained basis.
Meanwhile, many technology companies eschew the notion of a
dividend, arguing instead that resources are better spent on
innovation. Neither Google Inc. (GOOG) nor Apple Inc. (AAPL) pays a
dividend, for example. But other mature tech giants have initiated
dividends, including Oracle Corp. (ORCL), Cisco Systems Inc.
(CSCO), Hewlett-Packard Co. (HPQ) and Intel Corp. (INTC).
Seagate already was paying a dividend above the tech industry
norm. The new payout, at 25 cents a share versus a previous 18
cents, gives the dividend a yield of 5.1%. That compares to a 1.6%
yield from International Business Machines Corp. (IBM), 3.1% from
chip giant Intel and 2.7% from Microsoft Corp. (MSFT). The payout
should cost Seagate about an extra $29 million a quarter.
Seagate, which has a market value of $9.2 billion, also has
repurchased about $1.1 billion against its existing $2 billion
authorization approved in November 2010. The remaining balance is
expected to be utilized by the end of June.
The hard-disk drive maker expects to fund the dividend and share
repurchases through a combination of cash on hand, future cash flow
from operations and potential alternative sources of financing.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;
shara.tibken@dowjones.com
--Lauren Pollock contributed to this report.
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