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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: TigerPaw who wrote (164021)	2/11/2001 9:01:50 PM
From: jumper	Read Replies (1) \| Respond to of 176387

Dell fulfills option exercises by stock dilution - it simply issues new shares. It has traditionally managed this dilution through stock repurchases done through "collars" (sell a put option and use the proceeds to buy a call option) for a net effect of buying back more shares than are added from the dilution. Additionally, Dell doesn't pay for 30% of the shares because it gets a tax writeoff in the amount of the fair market value minus the strike price. The employee pays the taxes. "My understanding is that these "non-qualified" options are not counted in the financials when they are issued." I believe they are valued using Black-Scholes method at time of issue. Ask Stubba. "There's lot of talk about all the cash DELL has on hand to fight a price war. Will this have a significant impact on the war chest?" Doubtful. Dell is still turning a profit, abeit a smaller one, as far as I can tell. It could dip into the war chest to build more factories. Rapid market share gains will require more factories to build more PCs. "Also, given this inevitable impact on treasury, isn't it in MDs best interest to see the stock price fall in the short term so that it's even cheaper to get rid of these folks?" YES !!!! There is even some evidence that he has done what he can to keep stock price down without harming fundamental finanical performance. A couple of years ago Microsoft's Steve Ballmer made a comment saying Microsoft's stock was over valued. Shareholders were incensed. Michael Dell made a quick public comment on Ballmer's comment saying "maybe he is having a problem dealing with the high cost of employee stock options". Microsoft was much more liberal with stock options than Dell ever was.