Amazon.com reassures investors with big buyback

With its share price in free fall after badly missing analysts’ fourth quarter profit estimate, Amazon.com has decided to spend billions buying back its own shares.

Amazon.com disclosed in a filing with the Securities and Exchange Commission that it named a new board member and its board authorized the company to repurchase up to $5 billion worth of the company’s common stock. The new authorization replaces an existing $2 billion authorization that was approved in 2010, of which only $1.237 had been expended.

“The program allows the company to repurchase its shares opportunistically from time to time when it believes that doing so would enhance long-term shareholder value,” the company said in the filing.

The board action follows a steep decline in the company’s share price following the release of fourth quarter earnings per share of $1 that was well below analysts’ consensus estimate of $1.54. The earnings miss prompted a sustained sell off in Amazon shares and caused the stock price to fall below $500 in early February after nearly touching $700 a share at the end of last year.

In addition to the buyback news, Amazon.com said Corning CEO Wendell Weeks was elected by the board to serve as the company’s newest director and a member of the Audit Committee. Weeks has held a variety of roles at Corning since 1983 including president and chairman. His election would appear to expand Amazon.com’s board to 11 members from 10.