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Technology Stocks : Cymer (CYMI)
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To: Holyman who wrote (12988)1/22/1998 8:36:00 PM
From: John Bloxom  Read Replies (2) of 25960
 
<<encourage Cymer to repurchase its stock>>

I've been holding my peace on this idea for a long time now, but I would now offer that a repurchase program now actually could harm the stock. I say this because the company just finished the convertible offering in August, thereby making clear that it needed cash to fund its expansion. For it to do an about face now and start redeeming shares from the float would be completely inconsistent with that offering. It would represent a sudden reversal in capital management and therefore long-range planning of the kind that suggests indecision and fear in the boardroom and results in "strong sell" recommendations from the analysts. Mature companies redeem stock because the resulting increase to EPS of the residual shares outstanding is greater than could be achieved by deploying the same capital in the line of business in which the company operates. Year later IPO's do not buy back their stock. If they're properly run, and lucky, they do second stage offerings to fund the expansion that will accelerate their earnings up into the next level.

The Company had it rightwhen it said that the best way to respond to the price pressure and rumors was to ship more units. I just hope it has. We'll see in a weeks' time.

Regards,

John
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