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IBM Stock Rises on 10% Dividend Boost

IBM shares creep up after the company raises its dividend 10% to 55 cents.

Updated from 12:18 a.m. EDT

IBM

(IBM) - Get Report

shares crept up in Tuesday trading after the tech bellwether announced plans to boost its quarterly dividend and launch a $3 billion stock repurchase program.

The company raised its quarterly dividend from 50 cents to 55 cents a share, marking the 14th year in a row that IBM has increased its dividend.

Not surprisingly, investors responded positively to the news, and IBM's stock rose $2.43, or 2.43%, to $102.38, outpacing a modest advance in tech stocks that saw the Nasdaq climb 0.14%.

"

We view the unexpected dividend increase as a modest positive, especially in light of the current macro backdrop," wrote Maynard Um, an analyst at UBS, in a note released Tuesday. Um maintained his "neutral" rating and $100 IBM price target.

IBM's board also authorized $3 billion in additional funds for its stock repurchase program Tuesday, and now has approximately $6.7 billion with which to buy back stock.

"We were not surprised to see the additional repurchase authorization," wrote Maynard. "IBM only had ~$3.7billion remaining under its current authorization and expected share repurchases to likely accelerate."

The analyst nonetheless warned that the tech leviathan is still vulnerable to the

vagaries

of an unforgiving economy. IBM could capitalize on its strength in areas such as public sector, , he explained, but still suffer from limited improvements in the short-term macro environment.

IBM recently

missed

analysts' first-quarter revenue estimates but repeated its bullish commitment to 2009 earnings of $9.20.

The Armonk, N.Y.-based firm, which was recently in discussions to

buy

troubled tech giant

Sun Microsystems

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(JAVA)

, is also confronted with a rapidly shifting competitive landscape. Sun was eventually snapped up by IBM's database rival

Oracle

(ORCL) - Get Report

and even networking giant

Cisco

(CSCO) - Get Report

is stepping on Big Blue's toes with its recent entry into the server market.

Storage behemoth

EMC

(EMC)

became the latest company to flex its muscles when it launched its high-end

V-Max

system, a direct competitor to IBM's Enterprise Storage Server.

IBM, however, is already corralling its wagons, notably by

deepening

its distribution deal with

Brocade

(BRCD)

for Internet switches and routers.