Big Blue Bolsters Buyback Boom

First quarter buybacks totaled about $110 billion, says S&P. Meanwhile, Biogen and IBM do their part to keep the boom going this quarter.

Another day, another couple of large share buybacks.

Biogen said Wednesday it would begin buying $3 billion of its shares, which works out to about 16 percent of its total market capitalization. And, as has reported, IBM announced it repurchased $12.5 billion of its common stock using accelerated share repurchase agreements.

These are not isolated events. Standard & Poor’s tells that buybacks in the first quarter probably amounted to around $110 billion, making it the second highest quarterly total. It also tops the fourth quarter of 2006, when buybacks hit $105 billion. The first quarter of 2007 also marked the sixth consecutive quarter that buybacks topped $100 billion.

“It’s strong in the second quarter as well,” says Howard Silverblatt, senior index analyst with S&P. In 2006, he notes, S&P 500 companies spent more on buybacks— 432 billion— than the government spent on Medicare ($408 billion).

And companies are still sitting on plenty of cash to repurchase more of their shares. S&P calculates that industrial companies that compromise the S&P 500 Index currently have $598 billion in cash.

The buyback binge has had a big impact on overall liquidity. Since the surge got underway in the fourth quarter of 2004, 7.7 percent of the S&P 500′s capitalization has been retired, and there is little sign of the trend abating.


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