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Technology Stocks : Dell Technologies Inc.

DELL 111.10

-7.8%

Jan 20 3:59 PM EST

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To: Chuzzlewit who wrote (52217)	7/18/1998 11:18:00 PM
From: Meathead	Read Replies (2) of 176387

Ok, I'm no a financial analyst but I spent a few minutes putting my pea brain to work to try and figure this out. Here is a simple scenario I've conjured up. Company XYZ embarks on a 10 Million share repurchase program Before: Cash: $2 Billion Shrs OS: 100 Million Over a 3 month period, they repurchase 10M at an avg of $50/shr. They also grant stock options to employees totaling 7 million shares. After: Cash: $1.5 Billion Shrs OS: 90 Million Diluted: 97 Million So what has really happened? All I can see is that the company bought something that cost 500 Million dollars. What did they buy? Well, here are some of my observations. Cash: Went down. Dell apparently has far more cash than they need to grow the business. They are left with deciding where to invest the rest. Acquisitions? No. Wall street views too much cash on the balance sheet as a negative. Book value: Went down. As a result of spending cash. Wall street does not value stocks based on book value. This goes in the don't care category Shares Outstanding: Reduced. Basic and diluted. A good thing. EPS: Increased. A natural byproduct of reducing shrs OS. Employee Ownership: Increased. My previous posts outline why I think this is an invaluable asset. So what's really going on here? Seems like Dell is re-investing a large portion of it's earnings into it's most valuable asset... it's people. The effect of this strategy seems to impact those balance sheet metrics that wall street doesn't care about for stock valuation purposes. Yet, it re-distributes the wealth within the family and develops a highly loyal workforce. Hmmm, is Dell smart? Maybe<g>. As for accounting, I consider this an ongoing infinite loop scenario. Various repurchase strategies, differing times and prices, options granted at different prices at various times throughout the year, very hard to get a handle on and quite complicated. I prefer to distill it down to the elemental investment in people. How has Michael Dell managed to keep a financial genius like Tom Merideth around for so long? Correct me if I'm wrong. Given the amount of time I spent on this, I probably am<ggg> MEATHEAD

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