dividend, Intel ups buyback sets $25B

Chipmaker puts cash to use, raises payout by 25%

Chipmaker Intel plans to spend $25 billion buying back stock, the second- largest share repurchase in the U.S. behind Microsoft’s record $30 billion buyback.

At current prices, the buyback would represent about 17% of the company’s stock. Santa Clara, Californiabased Intel also said Thursday that it will increase its dividend

by 25% to 10

cents a share.

Intel and Microsoft, sitting on record piles of cash, are choosing to return money to shareholders rather than making acquisitions or investing in new ventures. Buying back shares may help Intel bolster a share price that has dropped in three of the past ? ve years.

“ No business they could invest in is a s good a s buying t heir own stock,” said Tim Allen, who helps manage $ 6.45 billion for Seattlebased Wentworth, Hauser & Violich. “ Any business you get into is not going to be as good as the business you have, so it’s easiert o buy your own stock. It’s about earnings, and that’swhatwe like to hear.”

Intel, the world’s biggest chipmaker, expects to post its third straight year of sales growth of more than 10% in 2005, and it is building smaller chips that lower pr oduction costs and moving into new markets to spur growth. Chief Financial Of ? cer Andy Bryant said in August that more buybacks and higher payoutswere likely.

Shares of Intel were up 16 cents to $ 24.96 in late trading. They have added 7.4% this year after falling 27% in 2004. Intel, with a market capitalization of $152 billion, has more than 6 billion shares outstanding. At the current share price, the repurchase would reduce the shares outstanding by 1 billion.

“ Today’s announcement signals our con ? dence in the growth, earnings and cash generating potential of our business,” Chief Executive Paul Otellini said in the statement.

Intel had cash and marketable securities of $ 13.9 billion at the end of the third quarter. The company added a dividend in 1992 and has paid out $ 5.8 billion in the past 52 quarters. Dividends will total $2 billion this year.

S&P 500 companies last year bought a record $197 billion of their own stock, 50% more than the previous year, according to data compiled by Bloomberg.

Most buybacks are used to satisfy stock options, according to S& P. Technology ? rms, which have relied on options to lure employees, accounted for 26% of last year’s repurchases even though they made up only 15% of the S&P 500’ s value.

Intel had 313 million shares left for repurchase under an older program, or $ 7.8 billion at the current price. The $25 billion includes that amount. “ It’s a very, very large amount and this is way more than buying back shares just to reduce dilution from stock options,” said John Lau, an analyst at Jefferies & Co. in New York.