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Technology Stocks : Silicon Graphics, Inc. (SGI)

SGI 87.31

+3.2%

Nov 21 3:59 PM EST

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To: Al who wrote (3246)	10/28/1997 1:17:00 PM
From: brushwud	Read Replies (1) of 14451

Interesting point you made about the IBM stock buyback. I looked up an article about it at yahoo.com which doesn't indicate that they actually bought stock today, only that they had increased the amount they may buy back by $3.5 billion. The article also says they bought back stock in the third quarter. Back in 1991 or so, Compaq made an investment in SGI in the form of around $100 million of convertible preferred stock when Rod Canion (founder of Compaq) was still in charge, and it looked like they might develop more of a relationship long-term. Then the management of Compaq changed, and SGI bought back the convertible preferred a year later. After the MIPS merger with SGI was announced, it turned out that there was an SEC rule that prohibited a stock buyback within 90 days of a purchase for stock. SGI wound up having to replace equivalent securities to what it had bought back from Compaq with other investors (of which there were about eight) in order to complete the merger. And with the MIPS albatross around their neck, their stock was worth a lot less, so it cost them about $50 million extra. Just a little problem McCracken and Meresman blundered into in 1992. I'd never heard of such a rule before it happened to SGI and I'd like to know more about it, including whether the 90 days is both before and after a merger and/or announcement of a merger. But if IBM bought back stock within 90 days, that might make it hard (or dumb) for them to do a buyout of SGI for stock now. I imagine long-term investors would rather trade for stock than cash so they can time their own sales instead of having it all handed to them at once. And I wonder if Thursday makes 91 days, or if IBM is signaling lack of interest in making a $3.5 billion investment in SGI by announcing they'd prefer to invest that amount in their own stock? If not IBM, then maybe HP, as suggested in posting #3000.

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