Microsoft, HP, Nike plan $53 billion of buybacks after slump

Microsoft Corp, Hewlett-Packard Co and Nike Inc announced plans today to repurchase a combined $53 billion of stock after the bear market in US equities dragged down valuations.

Microsoft will buy back worth up to $40 billion of shares after the world's largest software maker last week traded at the lowest price-to-earnings ratio on record, data compiled by Bloomberg show.

Hewlett-Packard, the biggest personal-computer maker, increased its repurchase program by $8 billion as its shares trade within 12 per cent of their cheapest since 1996. Nike, the largest maker of athletic shoes, said it will buy back as much as $5 billion of shares.

More than $800 billion in announced buybacks last year helped the Standard & Poor's 500 Index and Dow Jones Industrial Average climb to all-time highs in October. The pace has slowed as about $521 billion in credit-market losses at banks stemming from the first nationwide drop in home prices since the 1930s sent the S&P 500 down 16 per cent this year.

“When companies have come in to buy their own stock subsequent to a financial crisis, they've bought at attractive prices and it's been a good use of liquidity,” said Michael Holland, who oversees $4 billion as chairman and founder of Holland & Co in New York. “I'm impressed.”

US companies announced $261 billion in planned buybacks this year through Sept 18, 56 per cent less than during the same period last year, according to Westport, Connecticut-based Birinyi Associates Inc. Microsoft, HP: Microsoft rose 3.7 per cent to $26.10 in New York trading at 10:04 am today after adding a $2 billion commercial paper program and saying it may sell as much as $6 billion in debt. The company increased its dividend by 18 per cent.

Microsoft shares tumbled 29 per cent this year through last week, pushing the P/E ratio to 13.24, the lowest weekly level since the Redmond, Washington-based company's initial stock sale on March 13, 1986.

Hewlett-Packard slipped 0.5 per cent to $48. The stock lost 4.9 per cent this year and traded for about 14 times earnings last week. That's 11.1 per cent more than the 12.6 ratio in July that was the lowest since July 1996. The company said it bought back as much as $1.6 billion worth of shares in the third quarter.

Nike added 0.9 per cent to $64.30. The repurchases, which would amount to about 20 percent of Nike's outstanding shares, start when an existing $3 billion buyback plan ends, the company said. Nike shares are little changed in 2008.