Samsung (NASDAQOTH:SSNLF) Buyback Plan Fails to Impress Shareholders
Samsung (NASDAQOTH:SSNLF) seems to have renewed its strategy. It was announced on Nov. 26 that the tech giant plans to invest in the repurchase plan of its shares. According to revelations, stock worth $2 billion are set to be repurchased by the company. It may seem like an ambitious idea, it is not going to tick the needle significantly. Hence, analysts see it as more of a show rather than an honest effort to award shareholders the excess capital.
According to latest statistics, the latest earning reports reveal that Samsung (NASDAQOTH:SSNLF) has nearly $63.3 billion in the form of net capital and investments. This represents nearly 34% of the company’s total market capitalization. Several analysts in the investment capital community had hoped to see Samsung (NASDAQOTH:SSNLF) return investors’ cash with all honesty and gentility. Hence, it seems that shareholders are disappointed in the company’s efforts.
Against all odds, the company’s head of investor relations has stated that analysts may have foreseen that the company may invest on buy back plans on huge basis, however the management feels it is wiser to hold on to the cash on hand to invest it on potential profiting possibilities, such as probable launch of a new technology.
Analysts and investors, however, seem to disagree. According to the company claims, why it thinks it wiser to keep hold on to the cash rather than paying it back to its shareholders is because it might need it at a later time to invest on newer technologies. But, the company allocates a specific portion of its capital to research and development department. The cash balance is utilized in the event of a company was losing money and undergoing loses. Hence, Samsung (NASDAQOTH:SSNLF)’s excuse of keeping the cash saved up is just a means to avoid paying it to its shareholders.
To be more precise, Samsung (NASDAQOTH:SSNLF) managed to make nearly $43 billion on sold products in its last quarter. This aided the company to generate $15.15 billion in gross profit. Further investment in its research and development left the tech company with operating profits worth $3.7 billion.
At its present operating expenditure levels, the operating income would have dropped to $0, provided the revenue dropped to $32.43, which is unlikely. But, even if these figures stood true over a short expense of its quarters, the company still has a lot of hidden capital, some of which could be shared with investors.
With a total of $63.3 billion available in net cash and nearly $183 billion market cap, a meagre $2 billion reserved for stock buy backs is a poor attempt on part of the heaving tech mammoth. Investors would have welcomed $20 billion, being spend for their good. However the current allocated figure seems insignificant and too meagre.
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Hence, Samsung (NASDAQOTH:SSNLF)’s stingy spending in favor of its investors, even with large reserves of cash balance that the company can afford to spend hasn’t done much to give confidence to investors and there evidently is a lack of trust.