Jim, re: I just think it is unusual for a company doing as well as DELL on all fronts of business to need to do a Debt offering.
That's because you don't understand finance. If debt is used for working capital purposes, I would view that as a negative because it means that Dell's cash conversion cycle is slowing.
In general, debt increases reward and risk to shareholders. That's why I cautioned a certain "Steve" on this thread not to judge companies on return on equity (ROE), because that number is very sensitive to debt levels. Here's an example Company A has assets of $500 MM, no LT debt and equity of $400MM. It earned $100MM, so it has a ROE of 25%. Company B is identical in every respect, except that it has debt of $200 MM (at 6%), so earnings were reduced by the interest of $12MM to $88MM (I know, interest is tax deductible, but I'm trying to make this simple!). So now we have a return on equity of 44%, just by using debt and buying back equity.
TTFN,
CTC |
