9 Stocks Shrinking Shares

Stock buybacks are generally considered a bullish signal on Wall Street. They return capital to shareholders, while declaring management's belief that its own cheap shares are its best return on investment. As long as profits remain consistent, share repurchases can even increase earnings per share, by dividing the same amount of earnings among a smaller pool of shares outstanding.

Today, we'll draw up a list of companies that have announced stock buyback programs, then consult Motley Fool CAPS to see which of those firms the 85,000-strong investor community favors most. If CAPS' top investors endorse the prospects of companies announcing buybacks, Fools should take notice.

Here are some of the latest companies to announce share repurchase programs.

Company	Buyback Announcement Date	Amount of Buyback	CAPS Rating (out of 5)
IRIS International	3/3/2008	$15 million	*****
Westell Technologies	3/3/2008	$10 million	****
Chordiant Software	3/3/2008	$25 million	****
Ceradyne (Nasdaq: CRDN)	3/4/2008	$100 million	*****
DivX (Nasdaq: DIVX)	3/4/2008	$20 million	**
Zoran (Nasdaq: ZRAN)	3/5/2008	$100 million	***
Netflix (Nasdaq: NFLX)	3/6/2008	$150 million	***
Novatel Wireless (Nasdaq: NVTL)	3/6/2008	$25 million	****
Juniper Networks (Nasdaq: JNPR)	3/6/2008	$1 billion	***

Sources: Company press releases; Motley Fool CAPS.

Investors at CAPS seem to like this group of companies announcing buyback programs, since most are rated at three stars or better. Yet it should be noted that just because a company has announced a buyback program doesn't mean it has to follow through on it. A company is not obligated to repurchase shares just because it's announced its intention to do so.

Buybacks have been partially fueled by the easy credit policies of the past few years. Companies didn't mind borrowing big bucks to repurchase their shares even if they were trading at all-time highs. According to Standard & Poor's, there were $586 billion in buybacks last year among S&P 500 companies, with $138 billion in the fourth quarter alone. Yet that figure was well below the record $172 billion recorded in the third quarter. With credit policies tight, we may be seeing far fewer share repurchase programs in 2008, or companies less willing to follow through.

A digitally enhanced future
When you think about sound compression technology, the first company that might cross your mind is Motley Fool Stock Advisor recommendation Dolby Labs (NYSE: DLB), and rightly so. Its technology is in a host of consumer products ranging from your DVD player to your hi-def TV, your laptop to, possibly soon, your cell phone. As ubiquitous as Dolby's name is, it's also part and parcel of many computer chips that take that digital signal processing technology and put it into a workable form for all the consumer electronic devices we use.

That's where Zoran comes in. Using a non-exclusive licensing agreement from Dolby, it takes that sound technology, incorporates it into its chips, and sells them to customers who have licensed the technology from Dolby. The two have collaborated for years with Zoran, tuning its chips for the Dolby algorithm. With the advent of all-digital television signals, next-generation hi-def DVD players, and a host of other audio and visual advances, Zoran seems to have a crystallized vision of growth.

CAPS players do, too, with 89% of them thinking Zoran will outperform the market. Players like NeroSagetrade saw earlier this year the general weakness in semiconductors as pressuring Zoran unfairly. But with rich assets, it's a tempting takeover target.

Zoran is the perfect contrarian pick as the entire semiconductor sector comes under pressure. Sure Zoran isn't going to produce triple digit revenue growth, but ... on paper looks like a killer deal. Zoran ... has a LOAD of cash, 356M or $7 per share... [T]hey can tack on approximately $1.25 a year onto these cash totals... Zoran has lost 30% in the last month on relatively no news and have more than paid their dues from a weak market. Ive always felt these sub 1B dollar market cap companies with $4 or more in cash are buyout targets.

Certainly, Dolby has been willing to buy up companies to bolster its technology lead. Its Coding Technologies acquisition was seen as a push by Dolby into mobile communication devices, while snapping up Brightside Technologies was a foray into the video playback side of high-brightness display technology.

Foolish fallout
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