Friday, 21 November 2008

What to do with all that cash?

(By Richard Holway)
I’ve never been in favour of share buybacks. They seem to be an admission that you really don’t have either the imagination or ability to do anything better with your cash – like an acquisition or other major investment. On the otherhand, I have long advocated that SITS companies should pay decent dividends like other companies. Why not a 5% yield on SITS stocks?

This morning Microgen announced that it has spent c£7.9m buying back c16m or 15.6% of its issued shares at c49p. Microgen shares closed at 43.5p yesterday so one can well understand why the tender offer was fully taken up.

Speaking to investors in Barcelona, Reuters quotes Dr Mike Lynch saying that Autonomy is “relatively acquisition-averse” and that it might also be considering a share buyback or dividend.

George O’Connor at Panmore Gordon said in his note this morning “Dr Lynch has been very astute in making acquisitions – we see potential for more next year and would rather that he continued his impressive M&A track record. We appreciate that cash generation has been a cloud over the stock for a while yet latest results featured record cash collection, US$134m, cashflow generated by operations, US$59.6m, up 196% - profit was up 162%. At Q3 Autonomy had cash and equivalents of US$166m.”

I’m with George on this one too. I’d much rather Autonomy continued its strategic M&A. But a modest dividend would be good too!

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