Quote Originally Posted by Dayuhan View Post
Companies hire workers, build plants, and expand into new business because they see increasing demand for their products. Why would a company build a plant and hire workers to produce goods if there's no market for the goods to be produced?
From the article:

Over the last decade, in fact, companies that spent the most on repurchases had a total shareholder return of 37 percent versus 127 percent for companies that spent the least, according to research by Gregory V. Milano, chief executive of Fortuna Advisors, which consults with companies on how to raise their share price over the long term.

In the cases of Pfizer and Zimmer, analysts say the rush to buy back shares crimped development of new products, a prime reason that both companies are experiencing slow revenue growth.

Despite the looming expiration of the patent for its best-selling drug, Lipitor, Pfizer spent more than $20 billion repurchasing shares from 2005 to 2010.

“In that era, it wasn’t the best use of cash,” said Catherine Arnold, an analyst with Credit Suisse. “They should have been doing more to fix the company.”

Matthew Dodds, an analyst with Citigroup, said, “Zimmer has shown little appetite for acquisitions or diversification, yet they don’t sport a pipeline that can drive investor interest."

Nevertheless, Zimmer is on track to repurchase $1 billion worth of its shares this year, double last year’s pace, and it actually borrowed money last quarter to achieve its goal.