|UPDATE: Seagate Adds $1 Billion To Stock Buyback, Raises Dividend |
--Seagate adds $1 billion to its stock buyback
--Hard-disk drive maker also boosts quarterly dividend by 39%
--Seagate says it's committed to maximizing shareholder value
(Updates throughout with additional details.)
By Shara Tibken
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- 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; firstname.lastname@example.org
--Lauren Pollock contributed to this report.