RE: I agree with the others questioning your logic on debt. As long as the incremental return on the debt exceeds the cost, borrowing makes sense. Also, buying back shares works long-term, as continued earnings are distributed over fewer shares. If the stock is undervalued, it make sense to buy it back. And isn't Dell in the best position to know wether it is undervalued or not?
Yes, buying back shares is good because the denominator is made smaller which helps forever.
But if you do both, then there is a drain on the numorator also.
If Debt is such a great idea, then why did DELL not use the Debt option 2-3 years ago ?
Why not 500 million back then and then 1 billion now ?
My point is not that Debt is the worst thing, My point is that it is a departure from the past.
Why the change. Is Debt suddenly some great idea that they never thought of until 1998 ?
Or are did they buy back too much stock last year and now can't fund expansion internaly ?
Last, is the stock undervlaued and therefore good to buy back ?
Well the stock is at historic highs interms of valuations.
The market decides weather it is a little too expensive or if it is a steal every day.
After several hundred percent appreciation, MSFT stopped buying their stock back, should DELL?
Stay long,
I will stay short, I am pleased with the poor preformance this week, it is either a failed rally or the calm before the explosion.
Time will tell.
Jim |
