In the age of technological advances, the older founders the industry were finding it hard to stay afloat as their younger, perkier counterparts took the stage with fancier innovations. Needless to say, they needed to found a way to counteract profit loss and unhappy stock holders. The announcement that IBM would repurchase $2.5 billion of its own stock resulted in a price jump of 7% because "stock buybacks are a traditional way for corporations to return excess cash to shareholders without increasing quarterly dividend requirements. These payments are one-time cash distributions, over and above the normal cash dividend amounts, with the shares normally repurchased in open market transactions. In fact, in recent years, share repurchases have returned more cash to shareholders than cash dividends" (Hurtt, Kreuze, & Langsam, 2008).

"Stock buybacks can increase stock prices on announcement, due to the anticipated reduction in the number of shares outstanding" creating a seller's market (Hurtt, Kreuze, & Langsam, 2008). for someone with a surplus of stocks in their hand, this is a favorable situation.

"Companies often dispute this direct relationship. Intel, for example, spent approximately $4 billion on stock buybacks during 2004 and issued 63.7 million shares to employees due to the exercise of stock options. To counteract dilution from these options exercises, $641 million in cash outflows were required. Moreover, while Intel has repurchased 2.2 billion shares at a cost approximating $42 billion from 1990 to 2004, Intel had as many split-adjusted shares outstanding in 2004 as it did in 1990. Chuck Malloy, Intel’s communication head, said there is no connection between Intel’s stock-buyback and stock-option programs, and that Statement 123R’s new disclosure rule does not apply to Intel" (Hurtt, Kreuze, & Langsam, 2008).
References

Hurtt,