Big Blue, under pressure in recent days after a worse-than-expected earnings report triggered in part by falling hardware sales, is seeking to boost confidence in its stock with a bigger dividend and a larger share repurchase program.
IBM (NYSE) announced the changes Tuesday.
It boosted its dividend 12 percent and approved $5 billion in stock buybacks, seeking to reward investors after that disappointing earnings report earlier this month.
Executives also plan to seek board approval of additional stock repurchase authority in October.
“IBM’s business model focused on higher value and continuous transformation continues to generate strong profit and cash flow,” said Chairman and Chief Executive Officer Ginny Rometty. “This enables the company to deliver value to our shareholders. Since 2000, we have returned over $150 billion to shareholders in the form of dividends and share repurchases.”
IBM had $6.2 billion remaining from an earlier repurchase plan.
The dividend of 95 cents a share will be payable on June 10 to shareholders of record on May 10, IBM said today from its annual meeting in Huntsville, Alabama.
Rometty, who took the reins at IBM in January 2012, is returning more cash to shareholders after a rare earnings shortfall sent the stock tumbling 8.3 percent in one day. The company’s first-quarter profit, released on April 18, missed analysts’ estimates for the first time since 2005, according to data compiled by Bloomberg.
IBM shares rallied on the news to as high as $201.17 on the news, up from Monday’s close of $199.15. The shares had climbed 4 percent this year through Monday, compared with a 12 percent gain for the Standard & Poor’s 500 Index.
Big Blue also is making management changes in the wake of the earnings report. Rod Adkins, the head of IBM’s hardware division, will become senior vice president of corporate strategy, a person familiar with the matter said last week.
Tom Rosamilia, who has been overseeing corporate strategy, will take charge of the hardware business, reporting to Steve Mills, senior vice president of software, the person said.
Sales at the hardware division dropped 17 percent last quarter, contributing to a broader slump at the company. Chief Financial Officer Mark Loughridge told investors on a conference call that the sales force was having “execution issues.”
Loughridge and IBM’s investor-relations team are taking pains to show investors how the company is working through its challenges, Ed Maguire, an analyst at Credit Agricole Securities in New York, said last week.
“What they were trying to do is be as open as possible because they understand that disclosure is extremely important for their stakeholders,” he said.
IBM employs some 10,000 people across North Carolina.
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