Chipmaker Qualcomm to buy back $15 bn of shares

Chipmaker Qualcomm Inc said it planned to buy back up to $15 billion of shares and up its quarterly dividend.

The company said it would buy back up to $10 billion of shares in the next 12 months. Its shares were up 2.6 per cent to $74.60 in extended trading yesterday.

Qualcomm also increased its quarterly dividend to 48 cents per share from 42 cents, effective 25 March.

According to the company, its capital return programme would be financed mainly through borrowings from the public debt markets this year.

The new buyback plan would replace the earlier programme, which had $2.1 billion authorisation remaining, according to Qualcomm.

The company had increased the size of its share buyback plan in March last year to $7.8 billion from $2.8 billion.

According to the company's statement yesterday, it would continue to return at least 75 per cent of its free cash flow to shareholders every year.

The year-ended September 2014 saw the chipmaker distribute $7.1 billion, or 93 per cent of its free cash flow, to shareholders in the year.

The San Diego-based company would increase its payout to $1.92 per share on an annual basis, according to a statement.

Bloomberg reported Mike Green, a fund manager at American Money Management Llc which owned the stock as saying it was a much bigger return of capital than usual. He added, the buyback was gigantic.

Qualcomm was returning more cash to shareholders as revenue growth decelerated with increased competition in a maturing smartphone market.

Analysts on average estimated that the company's sales this fiscal year would increase 3 per cent, according to data compiled by Bloomberg. That was down from 7 per cent growth in 2014, following three consecutive years with sales gains of at least 27 per cent. The semiconductor industry was increasing payouts and holding less cash as the business became more predictable and grew at a slower pace.

At the close of trading yesterday, Qualcomm's market value stood at $119.9 billion, meaning a $10 billion repurchase would reduce the company's outstanding shares by about 8 per cent.

Qualcomm shares, down 5.3 per cent in the past year, were up 1.7 per cent to $72.71 in New York before the announcement.

The company had an indicated dividend yield of 2.6 per cent which compared with 2.9 per cent at Intel Corp, the only larger US chip maker by market capitalisation.