BlackBerry maker Research In Motion Ltd
RIM's shares climbed 3.2 percent after the Waterloo, company said it would repurchase up to 21 million shares, or 3.6 percent of outstanding common shares on Nasdaq. RIM hasn't bought back any stock in the last year.
Although the share repurchase should give investors some comfort, we believe headwind concerns will likely remain, putting the onus on the company to continue to disprove market concerns through earnings strength, UBS analysts Phillip Huang and Maynard Um said in a note on Thursday.
RIM said the share repurchase program, which will run up to 12 months or until purchases are completed, may commence on November 9.
The shares trade at close to $60 on the Nasdaq. In late September, they hit a year high of $88.08. They have a year low of $35.05, set in March.
The buyback plans come at a time when many investors and analysts think RIM faces significant competition from other handset makers that will dent its future growth prospects.
I don't think RIM buying back shares is going to change that overall perception, but it'll tell people what RIM thinks about it, said Broadpoint Gleacher analyst Mark McKechnie.
RIM's shares dropped more than 6 percent on Monday after Citi Investment Research analyst Jim Suva told investors to sell the stock because an invasion of new phones, applications and competition pose a risk for BlackBerry.
Suva also said some wireless carriers are likely to slow promotional spending on BlackBerry and shift it toward new phones made by RIM's competitors.
Among the threats facing RIM are Apple's popular iPhone, a new Motorola
Much of RIM's growth in recent quarters has come from the consumer market, which has meant the Waterloo, Ontario-based company has found itself in direct competition with devices such as the iPhone.
Last month, Apple reported it sold 7.4 million iPhones in its last quarter and posted earnings that handily beat Wall Street forecasts, pushing its stock to record highs.
RIM, however, has faltered. In September, it posted results and an outlook that fell short of what investors were expecting and sent its shares tumbling more than 15 percent.
Canaccord Adams analyst Peter Misek said on Thursday that RIM's buyback plans suggest the company thinks investors are making too much of the challenges facing the company.
This is trying to telegraph to the market that competitive concerns are overdone, Misek said. Why else spend the money this way?
Meanwhile, RIM is also finding itself fighting for previously uncontested territory as the iPhone's availability increases. In Canada, for example, the iPhone is now available from all three of the country's major carriers. Until this week, only Rogers Communications
Also last month, RIM rolled out an updated version of its top-end BlackBerry Bold. The device is aimed at reasserting RIM's dominance in the professional market.
Shares of the company rose $1.85 to $59.46 on Nasdaq on Thursday morning and were up C$1.97 at C$63.36 on the Toronto Stock Exchange.
(Additional reporting by Susan Taylor and R. Manikandan in Bangalore; editing by Peter Galloway)