INTEL is weird

INTEL has authorized a $25 billion stock buy back plan, using its $10 billion cash, that is $15 billion short in cash, at least for now.

Now it offers to sell $1.4 billion of convertible debt (news: Intel to Offer $1.4 Billion Junior Subordinated Convertible Debentures).

Hmm? Selling stock to buy back more stock? Has INTEL used up all its money in stock buy backs so it needed to borrow for operations?

Buying back stock does not change a company's value (market cap), which should be a multiple of the profit and should be constant when a company buys back shares. However, with reduced number of outstanding shares and constant market cap, the unit share price should increase.

Who will benefit from the increase of the share price?

Option holders come to mind.

Some even argue that INTEL's real purpose is to sell the debt at higher conversion price. Stock buy back is just used to increase the stock price so conversion price can also be set higher.