Novell (NOVL) dirt cheap, good buy? Message Board

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Technology Stocks : Novell (NOVL) dirt cheap, good buy?

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To: ToySoldier who wrote (24554)	11/27/1998 10:12:00 AM
From: dwight vickers	Read Replies (2) of 42771

Very big issue with companies like MSFT. I saw a report that stated that something like 80% (it's been a while) of MSFT's earnings in 1997 would have been offset by what it cost them to buy shares in the marketplace, to fulfill employee option obligations. And other tech companies were in similar situations. Why is it important? Think about it. The wealth created for the shareholders is being spent to buy full priced shares in the market, to sell to employees for less than market value. NOVL winds up with the same amount of liquid assets after spending hundreds of millions to buy back shares. And potentially has the same number of shares outstanding. Or more at some point? "Earnings" are reported where none exist because of this expense. Investors run the stock up because of said "earnings". But the company continues to create no new value. Keep in mind that in bull markets nothing is a problem. LTCM wasn't a problem until the market started to drop. But shareholders start to look for "explanations" when things turn down. How about if earnings go to hell at some point, but there are still millions of options in the money that employees rush to exercise. Losses reported and cash on hand declining? I don't want to exaggerate the problem, but the articles I had read said it was a serious problem that was being ignored totally. With the "fully diluted shares" issue at NOVL, as described by others, it may take a while to see what has really occurred. But the bottom line to me is, if you are buying in shares with your (shareholders) cash, but total shares do not decline.......... Dwight

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