Stock buyback at Applied Materials

Implications: Applied Materials has gone through a massive stock repurchase during last few moths using a lot of the available cash in the program. Question is why and what will it do to the company long term.

Analysis: Applied Materials was buying back their stock at a very high rate during the last few months. Several issues could be address regarding this
1. Applied Materials had a lot of cash that was generated during the last decade (over $6B), the huge amount of cash became a liability for the corporation since it could be a target for a hostile take over and the fact that there was no use for it and it just sitting and getting money market rate in the bank.
2. There was no major acquisition that the company gone through that needed a lot of cash.
3. The company as the largest company in the business was not able during the last few years to get ahead (they are good in what they are and no improvement in their weak position). Based on that wall street wasn't that enthusiastic about the stock hence stock price was lingering compare to some of the other players (see VSEA, LRCX).
4. An easy solution was to use the pile of cash to repurchase stocks in a relatively low price and enhance share holders value. In the long term when hopefully the stock price will rise it would be recognized as a smart move, while they still maintain a healthy amount of cash.