NEW YORK -- Analog chip companies are firing up their stock repurchase programs in an effort to increase shareholder value and boost the market’s long-term confidence in their financial viability.
Earlier this month, Intersil Corp.’s board authorized the repurchase of up to $50 million of the company’s common stock. MagnaChip Semiconductor Corp. and Volterra Corp. also recently said their boards approved an expansion of previously authorized share repurchase plans.
Now, MagnaChip can buy an additional $25 million of its common stock, bringing the maximum amount it can repurchase to $60 million. At the end of June, the Seoul-based company had already repurchased $28.8 million of its common stock.
Volterra recently acquired $1 million of its common stock, and was just authorized to increase its stock repurchase plan to $15 million. “We intend to increase our buyback activity going forward,” Mike Burns, chief financial officer of Volterra (Fremont, Calif.), said recently.
Analysts said the soft macroeconomic environment is weighing on analog chip companies’ income statements, and financial results and revenue guidance are coming in below Wall Street expectations. However, they still have significant cash flow, and given the low rate they can earn from their cash, repurchasing shares is a good use of capital.
“The cash balances are higher than you would need to sustain the business,” said Suji De Silva, an analyst at Think Equity in San Francisco.
At the end of the second quarter, Intersil’s cash and short term investments totaled $316.1 million; MagnaChip had approximately $161 million in cash; and Volterra, $146.8 million compared to $126.7 million last December.
It’s not only analog companies taking the step to shore up investor confidence. Xilinx Inc. also said this week that its board authorized the repurchase of up to $750 million of its common stock, or approximately 8 percent of its outstanding shares at the current stock price.