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Technology Stocks : Apple Inc.

AAPL 273.85

+0.5%

Dec 24 12:59 PM EST

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To: Alomex who wrote (14137)	5/29/1998 12:21:00 PM
From: Eric Yang	Read Replies (1) of 213177

"I'm not even remotely an accountant but the thing reads like they financed their profits from selling the silverware, so to speak." Alomex...I've been reluctant to post here, but you're persistent statement about the convertible notes prompts me to do so. I suggest you do a bit more research on the subject before jumping into your simplistic conclusion. The convertible notes is a complicated issue which is why I been putting off writing an article on it for months. The convertible notes will neither be converted anytime soon nor cause earnings dilution until Apple's earnings becomes significantly higher. I've done the calculation a few months ago. I'll dig it up again if I have to. If earnings were to be calculated based on the "if converted" basis, we would add about $9 mil to Apple's earnings per quarter. That would offset the dilutive effect of the virtual shares. Another misconception that I often hear every time the convertible notes issue comes up is the fear that the note holder will convert them to Apple stocks. The simple but flawed logic is that if they convert the notes to AAPL stocks they would turn around and sell the stocks and drive AAPL price down. This is nuts. If you really take the time to understand the issue you'll realize that as shareholders it is to our best interest that the note holders convert those notes to AAPL stocks as soon as possible. The notes holders could sell AAPL short when AAPL rises significantly over the $29.205 conversion price when they want to lock in their profit. That way it'll allow them to continue to 1) earn the interest on the notes, 2) cover their shorts and close the transaction without exercising and losing the convertible notes. This type of transaction may have been causing some of the resistance near $30 that we saw earlier this month as well as the increase of short interest this month. By the way, this month's short interest data is out. As of 5/12/98 17.4 million shares as of AAPL was shorted which is an increase of 2.9 million shares. Eric

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