... " to force settlement beginning at an $8 share price." It would take an organized effort of shorting in the billions of dollars or a market collapse to 3800 Dow.. or a scandal to make this happen. At this point, its in Dell's interest to boost investor return even more and press its competitive advantages. This weekend there's been PC sales pick up rumors floating around.. we'll see. meanwhile on the subject of Dell's put exposure here's a good article.
from theStreet : thestreet.com
"..... But Dell spokesman Mike Maher defended the technique, saying it "has been an exceptional value for shareholders." Maher added that if Dell had to pay for all its obligations right now, it would've bought almost 1 billion of its shares back for $12 billion, "which is less than half our stock price today. It's been an extremely good use of cash."
The company noted that it now is obligated to eventually buy 51 million shares with a repurchase price around $45 -- well above Dell's current trading range in the mid-$20s -- to be bought in stages through 2004. Then again, Dell has only 60 million shares left in its buyback program, with 940 million of the 1 billion goal already bought.
Investors who recently witnessed the implosion of another Texas company that courted much more risk, though, will take note of Dell's disclosure that the 51 million share obligation contains a footnote. If Dell's share price drops to $8, it has to settle up. Of course, no company thinks it will suffer a stock catastrophe, but if that were to happen somehow, Dell would have $2.3 billion in put obligations to cover, a fine portion of the $3.6 billion in cash it had on hand when it ended fiscal 2002 on Feb. 1." |
