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Technology Stocks : Dell Technologies Inc.

DELL 133.20

+5.7%

Nov 26 3:59 PM EST

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To: E. Davies who wrote (129963)	5/31/1999 11:44:00 AM
From: Chuzzlewit	Read Replies (1) of 176387

Eric, I think you are making a few mistakes in your analysis. First, stock buybacks are dividends -- not investments. I have previously published the financial mathematics demonstrating this on this thread, so I won't repeat it here. Outside of the tax-advantaged nature of the buyback there is no difference between Dell dividending the cash to shareholders and having them purchase additional shares with the cash. Second, the buybacks are not cash generating activities -- they use cash. I think you are confusing the sale of put options with the buyback. Although it is appealing to connect the two by assuming that selling puts finances the buyback, they are, in reality, quite distinct. Dell investing in Dell really boils down to putting money into plant and equipment (and buying an existing company also falls into that category). Anything else is not an investment. And if Dell chooses to acquire another company that is in fact investing in Dell, because what it really says is that management sees greater growth opportunity by purchasing a business (which will yield returns in excess of its WACC) than the repurchase of stock. TTFN, CTC

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