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Technology Stocks : George Gilder - Forbes ASAP
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To: Theophile who wrote (2440)1/6/2000 7:45:00 AM
From: peter n matzke  Read Replies (2) of 5853
 
"...companies taking on more
debt to fund buybacks." Recent share buybacks do not reduce the company's
shares outstanding - - when options are exercised the stock has to come from
somewhere . Issuing new shares is dilutive, so typically company fulfills option
obligations with shares it buys on open market which are very expensive today."

mthomas,
when a company buys back shares, the shares are classified as "treasury stock", treasury stock is the same as regular stock except that it does not carry voting or dividend rights.

Treasury stock may be retired by the company or used for other purposes such as the fulfilment of employee options programs.
Since the treasury stock has already been paid for and bought back,
it does not raise debt when used to service obligations.

Secondly, if a company is changing its debt structure by raising long term debt (bonds, etc.) this may actually be a very positive situation for the company as the true cost of the long term debt may be substantially lower than that of equity costs. Earnings and income may actually increase since the effective number of shares are actually lower. Hence it may increase the performance of the company, even though the debt of the company has increased.

Many of these issues can be quite complex and a simple generalization about any one particular company could be quite misleading.

regards
peter

ps, no position in Novell, long or short
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