Hewlett-Packard, the world’s biggest computer group, on Friday announced its biggest share buy-back – a signal that the company believes its shares remain undervalued in spite of doubling in price over the past two years.

HP’s board on Thursday earmarked up to $8bn for share repurchases in the coming quarters.

The move, which followed a $6bn buy-back programme approved last year, comes as other technology companies are stepping up efforts to use their fat cash positions to increase returns to shareholders.

“We have been signalling that we are going to generate $10bn in cash from operations this year, and we have $10bn in cash on our balance sheet,” said Jim Burns, HP’s head of investor relations. “We believe that buying back shares is a good use of that cash.”

Mr Burns’s comments echoed statements on Wednesday by Mark Hurd, HP’s chairman and chief execuive, who told shareholders gathered for the company’s annual meeting that HP intended to pursue more stock buy-backs because it believes its shares were undervalued.

Cost cuts and improved execution under Mr Hurd have energised HP’s stock price, which had suffered from inconsistent results following HP’s controversial 2002 acquisition of Compaq, a rival computer maker.

Shares in the company, which hit a low of $19.81 the week before Mr Hurd replaced Carly Fiorina as chief executive in April 2005, rose 0.5 per cent to $39.91 by the close on Friday in New York.

Many big technology companies, such as Microsoft and Yahoo, have been spending cash to buy their shares on the open market in recent months.

Strong profits have led to large amounts of cash on many companies’ balance sheets, prompting companies to return some of it to investors.

IBM, the world’s second-biggest IT group by revenues, spent $8bn buying back its shares last year.

Dell, HP’s arch-rival in the personal computer market, spent $3.3bn on buy-backs last year before it was forced to suspend its repurchase programme in September pending the resolution of a Securities and Exchange Commission investigation into its accounts.

Mr Hurd said on Thursday that HP would continue to look for new ways to cut costs as it attempts to consolidate its position as the world’s biggest IT group.

“We are trying to become more efficient at the same time as we grow the company,” Mr Hurd said.

He noted that HP’s operating profit of $7.2bn last year on revenues of $91.7bn implied that significant opportunities for cost cuts remained in spite of the completion of a $1.9bn cost-cutting programme last year.

“Somewhere, running around HP are $84.3bn of cost,” he said. “Our job is to go through that $84.3bn and make sure everything is appropriately aligned to pursue the best interest of the company and ultimately for shareholders.”

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