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Technology Stocks : Novellus -- Ignore unavailable to you. Want to Upgrade?

To: Math Junkie who wrote (2355)	9/2/1999 1:09:00 PM
From: Dave Chanoux	Read Replies (1) \| Respond to of 3813

Richard (Since no one else answered your question, I'll try. I'm the fundamentalist here.) Why wouldn't the increase in book value (via cash on hand) offset the dilution in earnings? The cash on hand doesn't generate enough income. Earnings per share will be lower in the near term than if the company had not made the recent increases in the number of shares. EPS has a stronger effect over price than other factors such as cash. The pain will be felt slowly: the company determines shares outstanding as the average between the beginning and end of the accounting period. So the number of shares used in the eps calculations will be increasing steadily for the next year. 42 million is the ending number as I recall. (With that in mind, it is certainly hard for me to see a $3.00 per share eps which some of the analysts predict.) Some, like me, like the Novellus strategy of limiting financial risk. The company has essentially no debt, fixed expenses are held to a minimum, operating expenses are kept variable. The result is less operating leverage than other in the industry. Novellus income goes up less in boom times and goes down less in bust times compared to other in the industry. An alternate strategy would have had the company finance with debt, increase earnings per share leverage with fewer shares. I wouldn't be here if that were the case. Regards, Dave Chanoux