IBM announced this week that it would repurchase up to $1 billion of its outstanding common stock in open market transactions by the end of February 2008. In April, the IBM board of directors authorized $15 billion for the company's stock repurchase program, and in May, IBM decided to use $12.5 billion to repurchase its outstanding common stock from three banks through accelerated share repurchase agreements that would conclude at the end of February 2008.

"These stock repurchases are enabled by IBM's strong, consistent cash flow and are an important way of returning value to IBM shareholders," said Samuel J. Palmisano, IBM chairman, president and chief executive officer. "They are an element of our long-term roadmap for earnings per share growth through 2010 and also represent a good value at today's prices."

Public companies typically repurchase their stock to shrink the outstanding shares, which boosts earnings per share, which makes the stock more compelling to investors. In addition, if the stock is undervalued, companies sometimes snap it back up, hoping to change investor demand.