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Technology Stocks : Network Associates (NET)

NET 175.55

-5.0%

10:17 AM EST

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To: Geoff Nunn who wrote (2983)	7/30/1998 12:16:00 PM
From: Chuzzlewit	Read Replies (1) of 6021

Sure, Geoff, that's one component. But that would depend on knowing who holds the stock and what the average purchase price is. The problem with the use of stock to purchase another company is that it signals two problems: 1. Dilution. Inevitably s/h dilution in the acquiring firm is an issues. Look at the result of the MCAF/NETG merger which resulted in the formation of NETA as an example; 2. It also signals investors the idea that the stock is cheap (i.e. overvalued) compared to cash. Furthermore, with a pooling of interest the acquiring company gets to obscure the nitty gritty details of of the acquired company because it gets to avoid an audit and restatement of assets and liabilities. Pooling of interest accounting simply adds the two balance sheets together and recalculates the equity section in accordance with the conversion ratio. Geoff, the point is that there is a lot of value that the acquirer potentially gets in return for the possible premium incurred through capital gains taxes. TTFN, CTC

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