IBM Approves First Stock Split in 18 Years

International Business Machines Corp.’s board on Tuesday approved a 2-for-1 stock split, marking the first time in almost 18 years that the world’s largest computer maker has decided to split its shares.

IBM’s stock jumped $5 to close at $150.75 on the New York Stock Exchange. Earlier, it traded as high as $154.25. IBM last split its stock in June 1979.

The move was a surprise to some analysts, who expected the company to wait until the stock passed its all-time closing high of $174.75 set in August 1987. Still, a split is usually interpreted as a sign that the company believes its shares will rise further.

“It’s a good psychological boost,” said Phil Schettewi, managing director at Loomis, Sayles & Co., which owns IBM shares.

IBM’s stock, which has climbed 70% in the last six months, has fallen 13% since last Tuesday amid concern about slower growth this year.

Schettewi said IBM probably wants to lower the share price so more people would be encouraged to buy the stock.

“The days of the $150 stock prices are over--managements want them lower so they can get more liquidity,” Schettewi said. When a stock price is lower, it makes it easier for individual investors to buy shares of the stock.

Microsoft Corp. and Intel Corp. unveiled 2-for-1 splits when their shares traded at about $150. Microsoft split in December and Intel Corp. declared a 2-for-1 split earlier this month.

IBM’s move shows its management is confident that its turnaround is complete and the company is on track. The stock slid to an all-time low of $41 in August 1993.

IBM lost nearly $16 billion from 1991 to 1993 as prices for its flagship mainframe computer systems plummeted. Under Chairman Louis V. Gerstner Jr., the company has trimmed costs by $7.5 billion, cut more than 60,000 workers and refocused its efforts on helping customers set up and manage computer systems.

IBM also thinks its stock is a good investment, as evidenced by its aggressive stock-buyback program. The Armonk, N.Y.-based company unveiled a $3.5-billion buyback program in November and has bought a total of $9.7 billion of its shares since January 1995.

The split, which is subject to shareholder approval, would be distributed May 27 to shareholders of record on May 9. The next shareholder meeting is scheduled for April 29 in Dallas.

IBM also declared its regular quarterly dividend of 35 cents a share for each common share.