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Strategies & Market Trends : Ask DrBob -- Ignore unavailable to you. Want to Upgrade?

To: stan_hughes who wrote (58698)	5/5/2002 1:38:47 PM
From: Louis V. Lambrecht	Read Replies (1) \| Respond to of 100058

stan - if I remember correctly our posts of last Fall, we were one year too early. Even a broken clock...<vbg> My error anyway, as the real bad earnings will come from the new bookkeeping of options as expenses which are only due for FY2002 and many companies still are ending and reporting FY2001. IMHO.FWIW. The h#$% it is Sunday. Speaking of options, did you read the hit DELL has taken selling forward puts. ROFL. May 6th, 2002 Dell-uded Put sales come home to roost; a bottom in tech? By ERIN E. ARVEDLUND For an idea of how much technology companies lost dabbling in options, read the fine print in Dell Computer's recent 10-K filing. 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. more... online.wsj.com How many more corpses without a proper coffin?