by Alex Barinka, published April 21, 2014, at Bloomberg

International Business Machines Corp. is reducing stock buybacks after an $8.2 billion first-quarter splurge, putting more pressure on Chief Executive Officer Ginni Rometty to reignite sales growth or cut costs to hit her profit targets.
IBM said last week it won’t sustain its rate of share repurchases in the first quarter, when buybacks more than tripled from a year earlier to the most since 2007. The company plans to spend less than $5.8 billion total in the final nine months of this year.
Rometty has kept herself bound to IBM’s targets of at least $18 a share in adjusted earnings this year and $20 next year even as she tries to revamp the company in a shifting technology industry. With sales declining, she had ramped up repurchases, helping her hit projections for earnings per share simply by reducing the number of shares in circulation. Now Rometty must start increasing revenue or reduce expenses further — or risk missing the profit goals.
“You’ve got a bleak picture ahead if you continue to stick with this EPS guidance,” Nicole Black, a fixed-income analyst at Wells Fargo & Co., said in a phone interview. She has the equivalent of a sell rating on IBM bonds. “You’re not delivering organic internal revenue growth. There is not a lot of fat to be cut.”
IBM should consider using its cash to make more acquisitions that will help it grow, Black said.
Mike Fay, an IBM spokesman, declined to comment.
‘Stunning’ Support
Rometty’s first-quarter buyback bonanza was 41 percent higher than the $5.8 billion estimated by Barclays Plc. The repurchases made up “a stunning” 14 percent of all stock traded in the quarter, Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., said in a report last week. He said that helped support IBM shares, which rose 2.6 percent in the period, compared with a 1.9 percent gain in technology stocks in the Standard & Poor’s 500 Index.
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