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Technology Stocks : Dell Technologies Inc.

DELL 126.39

+2.8%

3:59 PM EST

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To: Lee who wrote (37907)	4/15/1998 1:13:00 PM
From: Chuzzlewit	Read Replies (1) of 176387

You're on target Lee, but there are some other considerations too. If you want to expand your capital base you have two choices: equity or debt. The choice of debt indicates that you believe that your stock is undervalued. That's why I always view it as a potential negative when companies merge using stock rather than cash. A second point is that there has been some debate among financial academics about optimal debt levels. According to the so-called Proposition #1, the ratio of debt to equity is irrelevant to share value. According to other studies, there is an optimal amount of debt for a company to carry (generally thought to be a D/E of around .3). The current trend among technology companies is to avoid debt, but I think that may change because it gives a company a lot of operating leverage. TTFN, CTC

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