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Technology Stocks : Network Associates (NET)
NET 196.20-0.1%3:59 PM EST
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To: Chuzzlewit who wrote (5379)6/20/1999 12:14:00 PM
From: Edwarda  Read Replies (1) of 6021
 
Companies repurchase shares when they believe that the price of the stock is too low. That implies that their assessment of the company's prospects are different than that of the investors. This implies that the company knows something that the investor does not know and will trade on it. That smacks of self-dealing because the individual investor is at a disadvantage.

Other companies repurchase shares on an ongoing basis as a tax-advantaged dividend. This has been the practice of Dell for several years.

I agree with you in approving of Dell's style. However, it has been my experience that many companies buying their stock because it is too are not necessarily self-dealing. It is often the companies' opinion that investors are being too shortsighted about or are misinterpreting the information available to all. As one CFO observed, "Hey, it looks to me right now like the highest return investment I have available."


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