There are two things we know about Oracle
- He prefers to deal in cash rather than equity when buying growth.
- He buys growth really, really well.
Ellison, you might say, is the opposite of Chesapeake Energy's
Ellison and Oracle have no such designs. Rather, the database deacon's board this week said it would up its stock buyback program by $8 billion, presumably financed through free cash flow. (Oracle has produced $7.4 billion in FCF over the trailing 12 months.)
And now, the bad news ...
If there's a problem with Oracle's buyback, it's in the reasoning. Quoting from the company's 8-K disclosure form:
Oracle intends to use the additional authorization to repurchase its shares from time to time to offset the dilution created by shares issued under Oracle's stock option and employee stock purchase plans and to repurchase shares opportunistically. [Emphasis added.]
Offsetting dilution doesn't create value, sirs. Oracle, like Intel
I don't mind buybacks, Larry. I like that you're putting cash to work; it's one of the great strengths of your business. But if you have the capital, and you want to add value to me, as a shareholder, forget about offsetting dilution. Pay me a dividend instead.
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