NetApp Inc.'s shares jumped Wednesday as the data storage company's plans to begin paying a quarterly dividend and buy back more shares outweighed a weak guidance.
THE SPARK: NetApp said Tuesday that it will begin paying a quarterly dividend of 15 cents per share to shareholders beginning this summer. It also more than doubled its stock repurchase plan to $3 billion and said it intends to complete $2 billion of those buybacks during the next 12 months.
THE BIG PICTURE: The Sunnyvale, Calif., company announced the plans to return cash to stockholders Tuesday as revenue growth for its fiscal fourth quarter and its outlook for the current period, which ends in July, fell short of Wall Street expectations.
The company is also cutting 900 jobs as part of an effort to streamline operations.
THE ANALYSIS: Investors shouldn't be that shocked by the weaker forecast for NetApp's fiscal first quarter given earlier signs of weaker demand in the storage technology market, said Stifel analyst Aaron Rakers. He noted that the forecast only includes a partial benefit from NetApp's restructuring efforts and no impact from its share repurchase plans, which means actual results could come in higher.
Rakers has a "Buy" rating and a target price of $42 on the company's stock.
SHARE ACTION: Up $1.16, or 3.2 percent, to $37.79 in early afternoon trading Wednesday. NetApp shares hit a 52-week high of $39.15 last Thursday.