Time Warner, Dell Take Losses by Investing in Their Own Shares

Time Warner Inc. and Dell Inc. made combined purchases of more than $10 billion in their own shares last year, and both have losses to show for it.

Time Warner, after buying back $6.2 billion in stock last year, has fallen 26 percent in New York Stock Exchange trading in the past 12 months. Computer-maker Dell, after investing $4 billion in repurchases, has dropped 11 percent. The decreases compare with a 9.7 percent decline in the S&P 500 Index.

``If the management says, `if I shrink the share base, earnings per share has to go up,' that logic is flawed,'' said David Ikenberry, chairman of the finance department at the University of Illinois in Champaign, Illinois. He said share buybacks generally pay off over time. ``It doesn't mean you're increasing the value of the company.''

At least 39 U.S. companies have lost money on buybacks they made in recent years, according data compiled by Bloomberg. Some have sought repurchases to fend off activists, while most have also been hurt in the past six months by declines in the U.S. stock market, said Howard Silverblatt, a senior index analyst at Standard & Poor's in New York.

Companies started accelerating share repurchases in the last three months of 2004 and spending peaked in the third quarter of 2007 at $172 billion, he said.

Time Warner boosted repurchases after billionaire investor Carl Icahn tried to force a breakup of the world's largest media company. Time Warner, which spent $22.1 billion from August 2005 to the end of 2007 on repurchases, has barely lifted its shares above $15 as the outlook for its cable and Web units has continually worsened, Sanford C. Bernstein & Co. analyst Michael Nathanson said in a report this week.

Keith Cocozza, a spokesman for New York-based Time Warner, declined to comment.

Dell spokesman David Frink said in an e-mail that Dell's share buybacks in the past two quarters allowed the company to reduce stock outstanding by 10 percent.

``Dell believes that share repurchases are an excellent investment and return value to shareholders,'' Frink said