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Hewlett-Packard Board OKs a $1 Billion Share Buyback

The company wants to combat share dilution from options grants.

Computer giant


(HPQ) - Get HP Inc. Report

said Friday that its board of directors has authorized it to spend an additional $1 billion to buy back its stock.

The main reason H-P needs to purchase its own stock is to offset dilution from issuing shares to its employees. H-P also buys back shares when it decides they are cheap.

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In the first three quarters of its current fiscal year, H-P bought back 29.8 million shares at a cost of $549 million.

According to the company's most recent


filing, as of July 31, 2003, H-P was already authorized to buy back $407 million of common stock.

As is the case at many tech companies, stock options not only cause share dilution but also take a big bite out of H-P's bottom line. For the most recent quarter ending in July, the company's profit of $297 million would have fallen by about two-thirds, to $107 million, if it had expensed options using the fair-value method.

The announcement was made after the end of regular trading, which saw H-P rise 18 cents, or 0.9%, to $21.15. Shares rose another 5 cents in after-hours trading.