Nvidia (NASDAQ: NVDA) turned in putrid earnings. It also announced that it would buy back a ton of its own shares.
The graphics chip company took a charge of nearly $200 million in its last quarter for product problems. Nvidia also admitted it did not see strong competition coming from rival AMD (NYSE: AMD). Nvidia lost $120 million in the quarter and revenue dropped slightly. Under most circumstances, especially in a weak market, the company's shares would be punished.
But according to The Wall Street Journal, "On a positive note, Nvidia announced a $1 billion increase to its stock-buyback program." For a company with a market cap of only $6 billion that is a big deal.
Share buybacks often do not do much for a company's stock price, but in a market where earnings are having a rough time in most sectors, the idea that EPS can be pushed up by a falling number of shares in the float could become more attractive. It is a form of "reverse dilution," which could find a new place in a bear market.
Nvidia share shares rose 10% after hours [shares are rising 6% in premarket as of 8:10 a.m.]. It may be a signal to management at other companies that buybacks are a sign that a firm thinks its shares are undervalued. The market cares more about that than it used to.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
8-13-2008 @ 11:32AM
Iridium said...
NVIDIA is buying as many of its shares back as it can to mitigate the damage from a massive selloff when it issues a recall for around 200 million faulty graphic chips.
NVIDIA may be facing the largest class action lawsuit in history. Every Macbook Pro with an NVIDIA chip is faulty along with hundreds of millions of other laptops around the world.
It would be a miracle if NVIDIA is still in business this time next year.
8-24-2008 @ 3:49PM
Krol said...
LOL iridium, how g0d dam stupid are you kid? Not even going to waste my time to point out how utterly retarded your post is. I'm just surprised you haven't drowned in your on dribble.