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Technology Stocks : DELL Bear Thread
DELL 117.44-1.6%Nov 20 3:59 PM EST
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To: Richard Tsang who wrote (853)5/25/1998 11:25:00 PM
From: Richard Tsang  Read Replies (1) of 2578
 
Cannot find current filing but based on last one (ending 11/2/97) they said the numbers on diluted basis would not be materially different from the those on "basic". That means the options outstanding as percent to total share outstanding is not high.

However, the amount spent on purchasing shares was more than what they made in the 9 months ($710 mil buy-back vs $659 mil net income) and the period a year ago ($336 mil vs $330 mil).

I think Dell management is very smart. They sold options to purchase shares so that they limit the cost of the share buy-back. It is a way to hedge against the cost of buy-back. During the quarter, they sold $38 mil worth of options, and in doing so, fixed the purchase price of the share buy back in future. Nevertheless, it is still a huge cost to the company. In the two periods cited it can mean that they used all the income (and more) to buy back shares so that the EPS growth can be enhanced, stock price will go up as result, and the management and employees benefiting the most as the cost they paid to buy shares from the company may be substantially below what the company is paying to repurchase. The amounts are substantial, based on that quarterly report, the proceeds from issuing shares for the employees represented less than 10% what the company spent on re-purchase. Will I buy the stock at market price? No way (Just my own opinion).

RT
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