Tech giant Samsung Electronics Co Ltd on Thursday unveiled a $9.9-billion share buyback after reporting its first on-year profit growth in two years thanks to strong component sales, pushing up its shares sharply.
The company would cancel all shares purchased through the buyback — it's biggest to date — and plans to give shareholders 30-50 percent of its free cash flow over the next three years, primarily through dividends, Samsung said.
The buyback, to be carried out in phases over a year, will be welcome news for investors clamouring for bigger payouts from the world's top smartphone-maker, which has lost market share to rivals such as Apple Inc and Huawei Technologies Co Ltd.
"Samsung's core smartphone business is struggling, which means shares will likely fall. The buyback helps defend the stock price," said Chung Sun-sup, head of corporate analysis firm Chaebul.com.
Cancelling the purchased shares will also help the Lee family, founders of Samsung Group, boost their control of the conglomerate's crown jewel.
Samsung's shares touched a near-six-month high and were up 2.2 percent as of 0340 GMT, when compared with a 0.3 percent decline for the broader market.
The maker of the Galaxy-series handsets and tablets said Q3 operating profit jumped 82 percent to $6.5 billion, in line with its guidance, and revenues rose 8.9 percent.
Samsung warned that earnings would fall sequentially in Q4 as currency conditions — which added 800 billion won to profit in the third quarter — became less favourable.
The mobile division posted its first on-year profit growth in two years, climbing 37 percent to 2.40 trillion won, thanks to strong sales of the Galaxy Note 5 as well as new lower-end products.
The firm said it aimed to keep fourth-quarter mobile profits at a similar level, although the outlook beyond that was unclear as it expected the global smartphone market to slow in 2016.
The chip division was the company's top earner for the fifth straight quarter, with a record 3.66 trillion won profit thanks in part to demand from smartphone-makers.
The results will raise hopes that Samsung's profit recovery is on track, even though investors are sceptical about its ability to return to the record earnings it posted in 2013.
Despite a major overhaul of its product line-up, Samsung's smartphone shipments will shrink for the first time in 2015 due to competition from Apple in the high-end markets and Chinese rivals in the low-end ones, said researcher TrendForce.