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To: bonnuss_in_austin who wrote (79294)	6/28/2001 9:10:54 AM
From: Zeev Hed	Read Replies (2) \| Respond to of 99985

Bonnus, another way to look at the last 13 Q of buy backs is that DELL, and its stockholders, had a tax break of 2.12 Billion, namely that group evaded taxes by that little tidy sum. How come? Well compare DELL to a Utility that disburses as dividends about 60% of tis earnings (not cash flow, mind you, and in DELL's case cash flow is almost twice earnings because of the additional tax break they get on option "costs"). Instead of paying out $5.3 B in dividends, that would have yielded the treasury about $2 B in income taxes from the recipients, it bought back its share, paying no taxes on this "disbursment" to share holder. Multiply this by the 50 or so other companies that do the same size type of tax evasion, and you get, very roughly $30 B a year, just from those companies, and probably twice as much if you add the hundreds of companies with smaller buy back programs. The tax system (that taxes dividends when disbursed in cash but not as higher percentage ownership) causes companies lke DELL to pay dividends as buy backs rather than cash. Zeev

To: bonnuss_in_austin who wrote (79294)	6/28/2001 1:35:39 PM
From: John Pitera	Read Replies (1) \| Respond to of 99985

That is a really excellent article, thanks for posting it . DELL spent all of their free cash flow in Q 1 of it's fiscal 2002 year. The second problem is that Dell is getting less and less bang for its share repurchase buck. Let's look at the data for each year: In fiscal year 1999, Dell spent $1.5 billion on share repurchases, equal to 65% of free cash flow. Consequently, diluted shares outstanding fell by 2.6% during the year, which is exactly what a shareholder would like to see (not to mention that the stock nearly quadrupled). In fiscal year 2000, Dell scaled back its share repurchases to only $1.1 billion, or 28% of free cash flow. Wise move, given the stock's lofty valuation -- it traded at a price-to-earnings ratio above 70 for much of the year -- but consequently, the share count only fell 0.7%. In fiscal year 2001, as the stock fell dramatically, especially in the second half of the year, Dell ramped up its share repurchases to $2.7 billion, equal to 68% of free cash flow. Yet the diluted shares outstanding rose 1.9%. The trend continued in the first quarter of fiscal year 2002, as Dell spent 99% of its free cash flow buying back shares, yet the share count rose 0.7%.