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Technology Stocks : Dell Technologies Inc.
DELL 127.26+3.8%3:15 PM EST
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To: Jim Patterson who wrote (55554)7/31/1998 11:59:00 PM
From: jim kelley   of 176387
 
JP

This what your lugubrious assessment of DELL should have said:

From the quarterly report, and this is from memory,
They raised $554 Million.
They bought back $324 Million in stock.

The debt was done so they could expand.
Either way you look at it,
If they had not bought the stock back they would have only needed half of the Debt offering.
But, If they had not bought stock back for the last 2 quarters, then they would not have needed any of the debt to expand.

So, The way I see it,
Dell issued the Debt because they want to generate more cash flow to buy back stock and expand earnings at a faster pace. Mikey wants his cake to grow faster so that the EPS growth rate is sustained and increased.
Now they have to pay relatively low interest on stock that they bought back and the money spent for expansion. With a ROI of 221% they can afford to pay 7% interest.
I view this as productive use of capital.

Let's draw this to a close.
(Especially since I have the last word at this point:)
We disagree on how to view the situation of DELL and their use of their debt offering.
All kinds of wonderful comments can be made on how it will help them expand and what a great mgt. move it was. The bulls view.

I think it was a great move by a mgt. team that does not want hard times to hit their company. If hard times hit, be it in 1998 or 2008, this debt offering increases their cash resources for the future needs.

Now I know JP that you think that DELL should pay cash for everything. But then the companies growth rate would not be a good as it is going to be.

Jim
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