Intel announced it would indefinitely suspend its stock buyback program due to coronavirus outbreak concerns on Tuesday via a regulatory filing. The semiconductor manufacturer explained it paused its share repurchasing initiative out of concern for the future rather than in reaction to present conditions.
“Intel’s management believes the suspension, while conservative, is prudent given uncertainty regarding the length and severity of the pandemic,” noted the firm.
Last October, the chipmaker stated its intention to buy back $20 billion worth of shares through 2021. Over the previous two quarters, the firm bought back $7.6 billion in stock.
Intel is Right to Suspend its Stock Buyback Initiative
Although no company is immune to the effects of the COVID-19 pandemic, the firm has weathered the crisis fairly well.
Last week, Intel CEO Bob Swan said his firm had maintained a 90 percent on-time delivery rate despite coronavirus related disruption. The chipmaker is also one of the few large technology companies to not revise its second-quarter earnings guidance in response to the viral outbreak.
The firm revealed it would not be changing its dividend payments in a March 24 Securities and Exchange Commission filing. Moreover, Oregon Live reports the chipset manufacturer had $13.1 billion in cash and short-investments as of December 2019.
Nevertheless, the semiconductor company made the right call to suspend its share repurchasing initiative. By pausing its stock buyback program, the firm ensured it has the capital on hand to endure a significant near-term decline in demand.
Intel is also wise not to carry out its share repurchasing plan given the unstable nature of the stock market. Last month, the firm’s shares traded at $70, but are currently priced at $53.14. As such, the firm will be able to provide better value for its stakeholders once the market calms down.
Intel Invests in its Workforce
The Santa Clara, California-based chipmaker has taken steps to protect its human capital as well as its liquid assets. In early March, the firm recommended that employees who could fulfill the responsibilities at home should work remotely. The company has also implemented on-site social distancing measures to promote the health of its factory staffers.
The manufacturer is also continuing to pay the regular wages of staffers who have been quarantined or diagnosed with COVID-19. In addition, the company offered to cover 15 days of child or elder care for employees who need those services. By doing so, the company’s leadership has signaled to its team members that it cares about their wellbeing.
As the coronavirus outbreak has wreaked havoc across the globe, many large corporations have instituted adjustments to protect their bottom lines. To its credit, Intel has made changes that serve the best interests of its stockholders and workforce.