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Technology Stocks : Dell Technologies Inc.

DELL 122.01

+4.1%

3:59 PM EST

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To: Sig who wrote (148079)	11/28/1999 10:03:00 AM
From: rudedog	Read Replies (1) of 176388

sig - Since Dell did not need the money, I pictured the loan as a way to establish a working relationship with the bank There is another reason why a company with plenty of cash might do a line of credit - the increasing number of lease deals that DELL is doing. This is usually described as a "hedge against interest rate shifts". The idea is that if DELL sells $100M in leases and borrows to cover the lease, they may be able to lock in a point or more because they can borrow more cheaply than the customer doing the lease. Then the deal turns into a straight hardware sale with a point or so sweetener. While this gives up a little upside, it also avoids a situation where DELL could make more on the money in the market than it could in the lease, and keeps the capital free. Basically DELL is saying they are in the computer business, not the finance business. CPQ recently started doing this. They had previously funded their leasing internally. I think the hedge is a more sensible course.

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