Intel Buys Back 7% of Stock in Deal With IBM

Intel Corp., exercising its renewed financial strength, said Thursday that it had repurchased more than 7% of its common stock from International Business Machines for $362 million.

IBM remains the largest shareholder of the Santa Clara, Calif.-based semiconductor maker, with 11.5% of the stock, as well as its biggest customer.

Intel returned to profitability this year after six straight quarters in the red. The company is benefiting from a long-awaited upturn in demand for personal computers, many of which rely on Intel microprocessors.

“It’s an earnings machine right now, basically. This is a long time in coming for Intel,” said Michael Kubiak, an analyst for Kidder, Peabody & Co.

Intel said it bought back 8.9 million shares of its stock from IBM at $40.625 a share, a price that was negotiated between the companies.

IBM now owns 13.7 million shares of Intel stock. However, that includes 7.8 million shares that are reserved to support IBM bonds that are convertible into Intel stock. IBM said it intends to hold the other 5.9 million shares as a continuing investment in Intel.

Intel’s stock, which fell $1 a share Wednesday before the announcement, climbed 75 cents a share to $43 a share Thursday in national over-the-counter trading. Kubiak said the buyback would have no effect on Intel’s earnings and probably did not affect the stock price.

IBM announced in 1982 that it would buy a stake in Intel to give the company an infusion of capital and support the U.S. merchant semiconductor industry.