Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Terry Maloney who wrote (163794)	5/4/2002 6:15:42 AM
From: MythMan	Read Replies (3) \| Respond to of 436258

>>In the late 1990s, Dell, Microsoft and Intel each sold millions of puts against their own stock (The Striking Price, May 1, 2000). The companies used the mad money from selling puts -- which give the holder the right to sell the stock at a certain price for a specific period -- to help finance buybacks or even pad earnings. (In one quarter, Dell made more selling options than hawking computers.) That free-money game has come back to haunt Dell, which last week disclosed that it had been on the receiving end of roughly 68 million shares of its own stock "put" to it by investors. The company had to shell out $3 billion in fiscal 2002 to buy all that paper, at an average price of around $44 a share. That's incredibly costly, as Dell traded in the 20s most of last year. Moreover, the company eventually must buy 51 million more shares at around 45 -- again, well above Dell's current price around 24 -- through 2004. Finally, a built-in "trigger" provision requires that, if Dell drops to 8, the box maker has to settle up on all the puts. Dell would have to spend $2.3 billion to cover this; it had $3.6 billion in cash at fiscal 2002's end. So, is all the bad news in Dell's stock price? Contrarians, take heed: the death rattle of put-selling programs could mark a bottom for Dell and other tech bellwethers. Note the multi-year lows last week registered by Oracle, Sun Microsystems, Cisco, Nortel, Lucent, JDS Uniphase, Corning, Nokia, Qualcomm and wobbly WorldCom. Together, these 10 stock prices totaled up to about $94 -- the price for one Procter & Gamble share. Who said old tech was boring?<< LOL!