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Technology Stocks : Cornerstone Imaging (CRNR)
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To: Mad Bulgarian who wrote (94)2/22/1997 2:39:00 PM
From: Mark A. Stang   of 430
 
No conflict between Tony's sound principles and CRNR's repurchase:

Tony:

I agree with everything you say about the need for Cornerstone to invest in and grow its software business. That's what they're doing as we post. But it certainly wouldn't be prudent to spend all of Cornerstone's $18 million, even over the next year or two, for this purpose. Cornerstone must park its cash somewhere, and I think we can agree that under the mattress or in T-bills is not the place to put the money. What better place to put $5 million (which is less than one-third of Cornerstone's cash, and certainly not needed for R&D in the foreseeable future) than in the stock of an undervalued company with a great future? I think that even you have posted that you expect CRNR to hit the 20's within the next year or so. So it seems to me that Cornerstone has made a very wise investment of its cash reserves. The stock is going to be retired as treasury stock. They can reissue it later and sell it on the market at a substantial profit when they need the cash for R&D or other purposes. Also, they can issue the stock as needed to honor employee stock option exercises.

I don't think Cornerstone is buying its stock back to prop up the price or appease investors. (If they really wanted to appease investors, they could issue a dividend, but you and I would both agree that this would be a bad move for a growing tech company.) To sum it all up, I don't understand why you are not unequivocally DELIGHTED by Cornerstone's stock repurchase program.
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