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Investing

Sun’s Share Buyback A Sign Of Slow Growth

Photo of Douglas A. McIntyre
By Douglas A. McIntyre Published

Not all companies that buyback shares are trying to offset slow earnings growth, but the mechanism does help push up EPS.

Most investors were disappointed by Sun’s (SUNW) last quarter and its forecast for the current one. The stock has dropped 14% in the last month.

Sun announced a $3 billion share buyback program. Perhaps it does not have any better use for the money. Sun’s market cap is only $18 billion, so the move could bring in as many as 15% of the company’s shares outstanding.

Sun’s shares moved up on the news, but, perhaps they should have moved down.

Spending $3 billion on the program when the company is signaling slow growth is an indication that management cannot improve EPS through revenue increases and cost-cutting. It is also a sign that the company does not see acquisitions that will help move up earnings.

All of those things bode poorly for Sun’s future.

Douglas A. McIntyre

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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