Cisco Systems has boosted its stock buyback effort by $10 billion, a sign the internet networking supplier still believes its shares are undervalued, an Associated Press report said.
The Associated Press report said the move, announced last week, is a way for the San Jose-based company to increase the value of remaining investors' stakes, counter the effect of employees exercising stock options and protect its financial image.
Cisco's decision highlights the dilemma many companies face in trying to reduce the dilution caused by generous employee stock option plans, the report said.
Cisco, the world's largest maker of internet routers and switches, has been profiting from steadily rising demand for more internet bandwidth and sophisticated networking gear to handle an influx of voice, video and data content on the web.
The Reuters report said since Cisco launched its stock buyback program in September 2001, it has been on a tear and seeking for ways to spend its cash horde, currently $24.7 billion, and return that value to shareholders.
The company has bought back 2.3 billion shares for a total of $46.2 billion, the report said.
The announcement brings the total amount Cisco's board of directors has authorized for buying back stock to $62 billion, the report said.
Cisco's total share count has declined by only 1.2 billion, from 7.3 billion outstanding shares in 2001 to 6.1 billion at the end of October, however. That's mostly a result of employees exercising options on 1.15 billion shares over the same period, the company said. Some of the increase came from funding acquisitions by issuing stock, Cisco said.