Irvine chipmaker Broadcom Corp. said Thursday it OK’d a plan to buy as much as $250 million of the company’s common stock in the next year.
Broadcom’s market value was $10.4 billion at close of trading Thursday.
The move would mark the first time the chipmaker has approved a stock buyback plan. When companies use cash to buyback shares it often benefits investors because, as the pool of shares decreases, earnings per share increases.
Broadcom had $1.2 billion in cash at the end of 2004.
“The company’s management and board of directors regularly evaluate the appropriate uses of cash, and they felt that a share repurchase would directly benefit Broadcom’s shareholders in a multi-step effort to reduce option dilution,” said company spokesman Bill Blanning.
A consequence of Broadcom’s employee growth and acquisition spree of the past few years has been the awarding of stock options. As those options vest, the company’s total shares outstanding has grown.
“These repurchases will be made in open market or privately negotiated transactions,” Broadcom said in a statement. “This plan does not obligate Broadcom to acquire any particular amount of common stock and the plan may be suspended at any time at Broadcom’s discretion.”
Broadcom’s plan is to buy class A shares. The company’s class B shares are controlled by cofounder Henry Samueli, chairman and chief technical officer, cofounder Henry Nicholas III, and other insiders. The class B shares have higher voting rights than the class A ones.
