Cisco Systems is making a show of confidence in itself and in the stock market with some new financial maneuvers.
San Jose, Calif.-based computer-networking equipment maker Friday says its board of directors has authorized a stock repurchase program of up to $3 billion over the next two years
But, Cisco won’t be able to begin buying back its own stock until U.S. stock markets re-open Monday after being closed for four days.
U.S. financial markets closed on Tuesday after two hijacked jetliners slammed into and destroyed the World Trade Center in New York City.
To help ease into Monday’s trading, the U.S. Securities and Exchange Commission announced Friday it would relax limits on corporate share repurchases.
SEC law usually restricts corporations from buying back their own shares and buybacks are not allowed when the opening bell and just before the markets close.
“We intend to make it easy for public corporations to make a decision to repurchase their shares,” says SEC Chairman Harvey Pitt. “But we will retain any restrictions that we think have an impact on public investors.”
In light of the events on Tuesday, analysts are expecting an outpouring of investors in American companies.
“We have tremendous confidence in the financial systems of our country, in our industry and in our market-leading position both today and into the future,” said John Chambers, president and CEO of Cisco Systems. “We believe that this stock repurchase program is in the best interests of our shareholders.”
Under the plan, any purchases under Cisco’s stock repurchase program may be made, from time-to-time, in the open market, through block trades or otherwise. Depending on market conditions and other factors, the purchases may be commenced or suspended at any time or from time-to-time without prior notice.
Analysts are quick to point out that Cisco will have plenty of company when it comes to announcements like this one.
“By offering a repurchasing of shares, the company does several things,” says KTVU-TV Business Editor Brian Banmiller. “If shares become cheaper, that will mean there are less on the open market. That may mean they will rise in price because there are less to go around. It’s simple supply and demand.
Banmiller says the repurchasing plan also lowers the volatility of the market and is apt to ease investor’s concerns about the company.
As of September 13, 2001, Cisco has approximately 7.3 billion shares outstanding. The company’s stock was trading at $14.47 on Monday.
