Intel Suspends Stock Buyback Program

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Supply chain disruptions from the Coronavirus have now become commonplace in the industry, even as China, and the virus' epicenter-of-outbreak Wuhan and start to stabilize life. Big and small tech names across the board have admitted the scope of the impact, with silicon-manufacturing tycoon Intel Corporation announcing today that following the havoc wreaked by the Coronavirus, it will suspend its share buybacks, in line with the $20 billion worth of repurchases announced in October 2019.

Intel Corporation Suspends Stock Buyback Due To Coronavirus (COVID-19) Hit On Stock Indexes

In a filing with the Securities and Exchange Commission, Intel has confirmed that for the time being, it will no longer repurchase shares as a part of a $20 billion buyback announced by the company in October last year. Following the announcement on October 24th, the company's share price jumped by roughly 8% on the open market as the stock closed on $56.46 the next day.

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The decision likely reflects the devastation wreaked by COVID-19 (Coronavirus) on market indexes all around the world. Major tech sectors have crashed and shed their value by as much as 30% over the course of the past few weeks, and companies themselves have seen massive decreases in equity values based on open market prices.

While a drop in share price sounds like a good time for a company's management to speed up repurchases, managements often make such decisions based on price momentum instead of current value. A stock likely to appreciate in the future is a stronger motivator towards buybacks then one that isn't expected to demonstrate such movement, and Intel's decision today reflects this trend.

Following a mass-market sell-off in the United States that commenced on February 20th, 2020, the NASDAQ-100 index has lost approximately 2,700 points in a 28% drop. The Standard and Poor 500 index and the Dow Jones Industrial average have also shed 34% and 37% over the same time period.

Major indexes have dropped since February and the downward momentum has likely pushed Intel's management to make this decision; Graph Courtesy of Koyfin.

Intel highlights coronavirus impact on its operations and gives grave forecasts for future

In addition to suspending share repurchases, Intel is also out with grave forecasts about the current global manufacturing glut. As per the company, the current outbreak and the resulting slowdown carries with it the potential to usher in a recession. This concern, while alarming, has been reflected by several corners and data from manufacturing indexes throughout the globe reflects this reality.

Intel also updated investors today on the measures it's taking to deal with COVID-19 and the impact these have had on operations. While the company, like several others, is yet to place a material value on the scope of losses that it might occur due to the Coronavirus, Intel has nevertheless admitted that quarantine measures, travel restrictions and other moves to control COVID-19 carry with them the potential to hamper its ability to meet future customer order, and subsequently make an impact on its top and bottom line.

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Entering into speculative territory, if Intel's revenues from a potential inability to meet demand do drop, then naturally the firm will have two avenues to keep its ship afloat as the earth recovers. It will either have to resort to cash and equivalents to fund its growth or take on more debt for meeting essential working capital and operational expenditure needs.

As per Intel's latest annual report filed with the S.E.C, the chipmaker has roughly $1 billion in financial instruments and $4 billion in total cash and cash equivalents. As we head into the market open, the company's shares have appreciated by 6.6% over yesterday's closing, and they are currently trading at a price of $52.87/share. Since February 2020, Intel Corporation (NASDAQ:INTC) has lost roughly 26% of its value on the open market slightly leading the NASDAQ-100.

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