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Technology Stocks : Dell Technologies Inc.

DELL 118.71

+1.1%

9:34 AM EST

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To: Alohal who wrote (110639)	3/22/1999 11:28:00 AM
From: Eggolas Moria	Read Replies (2) of 176387

Aloha1, I am somewhat troubled by the Forbes article which is reported to have said that over the past three years, DELL has earned $3.1 billion from financial engineering (selling puts and trading calls) on its own stock and only $2.5 billion in other earnings. If this story is true, it will take some time to work through the market, but it is an axiom that you don't pay operating earnings multiples for financial engineering growth. The latter is simply not high-quality recurring earnings. For example, if DELL were to have entered this quarter with essentially the same strategy that produced these earnings, what would the impact be? Moreover, on every earnings call going forward for the foreseeable future, analysts will be asking for the specifics as to how much of the earnings/losses come from financial engineering. I don't have a position in DELL, long or short, so this is simply an intellectual exercise. It may have some ramifications on other tech companies though as the heightened awareness will force the analysts to carve out the financial engineering contribution to reported earnings for the foreseeable future for a number of companies.

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