With a $2 billion offer on the table to acquire 3Par, Hewlett-Packard on Monday moved to allay shareholder concerns with a hefty stock buyback plan.
HP's repurchase program comes a few days after it raised its offer for 3Par to $30 a share, shortly after Dell matched a previous offer. Dell hasn't yet responded, but has three business days to do so. 3Par late Friday declared HP's bid superior and indicated that it would terminate its merger agreement with Dell without a matching bid.
To beat Dell and prevent it from getting storage traction in data centers, HP appears willing and able to pay 10x revenue for 3Par. Given the bidding war and the departure of CEO Mark Hurd, HP had to allay concerns. Enter the $10 billion buyback.
HP CFO and interim CEO Cathie Lesjak said that the company will "be active in repurchasing our shares, and we expect to repurchase at least $3 billion worth of our shares in our fiscal fourth quarter at current price levels."
The message for both shareholders and potentially Dell is that HP has a strong balance sheet. Indeed, HP had cash from operations of $3.3 billion for its July quarter with free cash flow of $2.1 billion.