Silicon Graphics, Inc. (SGI) Message Board

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Technology Stocks : Silicon Graphics, Inc. (SGI)

SGI 91.87

+1.8%

Dec 5 3:59 PM EST

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To: Ms. Baby Boomer who wrote (10450)	9/19/2002 10:29:01 AM
From: Seeker2007	Read Replies (1) of 14451

Well a buy-back announcement or reiteration will have a positive effect on the stock price. However, there are two reasons against a buy-back (1) SGI has a debt payment due in 2004 (Sep?) of ~$200 million. SGI currently has >200 m in cash and was cash flow positive from operations last quarter. So if business stays the same or improves they can pay the debt. However, the company needs some liquidity to operate and that limits their ability to use all of their cash to pay down that debt. The debt is trading at 55 c to the dollar though and therefore in principle, given cooperation of the bond holders SGI could retire the debt today for something north of $130 million. Given the debt overhang it is unlikely that SGI will use $50 million for stock repurchases at this point. (2) I do not believe that 50 million shares of SGI are available to be purchased at $1. Also daily trading volume has been ~300k recently and NYSE firms can only purchase 10% of daily trading volume. ------- Rehashing the old stock price issue, institutions and hedge funds are in control of stock prices, specially at this point. Assuming that they are accumulating shares they will not let the price rise unless forced to do so via an external event, viz., a good earnings report. (The corrolary is that if they are not accumulating shares, the price will is not likely to rise either) Ashish

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