> When was this stock buy back? Could you please give more details?
When they announced Q1 results for F96 (in October '95), they
announced a stock buyback of up to 7 million shares, and they
proceeded to buy about 2.5 million shares at around $30/share
during the next three months. At the SGI shareholders meeting
in October '96, when SGI was trading at $18, McCracken was asked
why they weren't buying more then, and he said because they didn't
have enough money (cash being down to about $250 million from
$750 million the year before, due to paying $500 million for Cray).
Well, I guess there are a lot of people who bought SGI at $30 and
didn't know what to do when it got to $18. But it's so much easier
to buy millions of shares using other people's money (the
shareholders'). By the October time frame, the loss on that stock
position ($12 x 2.5 million = $30 million) exceeded the operating
loss reported for Q1. It's amazing how one VP of Finance can lose
more money than the other 10,000 employees all working together!
Now the stock is most of the way back to $30, but if they'd had
that $75 million in the bank for over a year, they could have
earned millions in interest. A growth company should be investing
in its own expansion and not buy its stock back unless it gets
really cheap, and that would only prove they're not doing enough
to convince the investing public what they're really worth.
Maybe SGI+Cray isn't a growth company any more--revenue for the
last quarter was _down_ from the year before. Someday SGI might
be just another division of HP, like Apollo & Convex. If only Ed
had sold the company in '95, he could be Secretary of Defense now
and we'd all be better off. |
