Linear Tech Case Summary
Or Linear tech could pay out its entire cash balance as a special dividend,
Linear Technology payout policy. The company was founded in 1981 in California, by Robert Swanson. IPO was in 1986 ,NASDAQ. They manufacture custom-design integrated circuits (semiconductors) for electronic applications in the telecommunication, computer and the automotive industries.
The seventh-largest company listed on the Philadelphia Stock Exchange Semiconductor Index (SOX). The companies' success depended on top of the line engineers and developing high performance products.
The question here is whether …show more content…
External factors, it could have financing needs caused by market risks and the unclear effect of the Iraq war on American economy.
That meant, Linear needs to hold high cash reserves.
There were shareholders who expressed the desire for Linear Tech to return its cash, but this desire is not necessarily shared by all shareholders.
Linear should not return cash to its shareholders since Liquidity levels are sensitive to the market, they should keep at least 200m$ to cover unexpected expenses and try to enable business opportunities in the Asian market.
Linear should be ready to return to its shareholders when they are in a mature stage with reduced growth opportunities and a stable positive cash flow. That means less agency conflicts. Market valuation, that means it will give positive signals to the market about the future prospects of the firm.
When a firm cannot pay her dividends or reduces them this result in a decrease of the share price. With regard to the option compensation for executives, the repurchases would induce more value than dividend increase, which should be considered in an industry where there is talent competition. It also takes control away from