HBO & Co., an Atlanta-based healthcare information systems and services company causing celebrations on Wall Street, has decided to split its stock 2-for-1 again to get more traders to join the party.
The company's board last week declared the split in the form of a stock dividend payable to stockholders of record at the close of business Aug. 25, with a payment date of Sept. 9.
The doubling of shares comes only 15 months after another 2-for-1 split brought the company's share price back into double digits. In an unabated run during 1995 and into 1996, the stock reached as high as $132 per share on the NASDAQ exchange.
After splitting in May 1996, which halved the price back into the $60 range, the stock dipped into the low $40s early this year during an overall market sell-off of computer technology stocks. But the HBO & Co. price has rebounded since then, hovering between $70 and $80 per share since June.
"The board felt there was still a lot of value to be gained in the stock," said spokeswoman Monika Brown, and it decided to split the stock now instead of waiting for it to go above $100 like the last time. "When you split it, you make it more affordable to the retail trader," she said.
The stock news comes as HBO & Co. reported a 25% increase in revenues in the past four quarters ended June 30 compared with the year-to-year comparison ended June 30, 1996.
Earnings per share in this year's second quarter increased 63% to 44 cents vs. 27 cents a year ago, fueled by revenue increases of 31% in software, 27% in hardware and 21% in services.
At the same time, reductions in expenses contributed to higher operating margins, according to an analysis by Salomon Brothers, a New York-based investment firm.
That was a goal articulated by HBO & Co.'s president and chief executive officer, Charles McCall, in 1996 when he announced a push to increase the company's internal efficiency and generate operating margins of 25%, compared with the 19% margin registered in 1995 (March 11, 1996, p. 8).
The operating margin for the second quarter was 26.1%, the Salomon report said.
With the stock split, HBO & Co. will have nearly 200 million shares outstanding.