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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (15056)	8/4/2002 3:52:11 PM
From: cfimx	Respond to of 78525

over the life of the put program, dell made a large fortune. like any momentum investor, however, they over played their hand. it remains to be seen if history will judge this escapade a failure, however.

To: Jurgis Bekepuris who wrote (15056)	8/4/2002 4:40:10 PM
From: j g cordes	Read Replies (1) \| Respond to of 78525

... " to force settlement beginning at an $8 share price." It would take an organized effort of shorting in the billions of dollars or a market collapse to 3800 Dow.. or a scandal to make this happen. At this point, its in Dell's interest to boost investor return even more and press its competitive advantages. This weekend there's been PC sales pick up rumors floating around.. we'll see. meanwhile on the subject of Dell's put exposure here's a good article. from theStreet : thestreet.com "..... But Dell spokesman Mike Maher defended the technique, saying it "has been an exceptional value for shareholders." Maher added that if Dell had to pay for all its obligations right now, it would've bought almost 1 billion of its shares back for $12 billion, "which is less than half our stock price today. It's been an extremely good use of cash." The company noted that it now is obligated to eventually buy 51 million shares with a repurchase price around $45 -- well above Dell's current trading range in the mid-$20s -- to be bought in stages through 2004. Then again, Dell has only 60 million shares left in its buyback program, with 940 million of the 1 billion goal already bought. Investors who recently witnessed the implosion of another Texas company that courted much more risk, though, will take note of Dell's disclosure that the 51 million share obligation contains a footnote. If Dell's share price drops to $8, it has to settle up. Of course, no company thinks it will suffer a stock catastrophe, but if that were to happen somehow, Dell would have $2.3 billion in put obligations to cover, a fine portion of the $3.6 billion in cash it had on hand when it ended fiscal 2002 on Feb. 1."

To: Jurgis Bekepuris who wrote (15056)	8/4/2002 5:54:39 PM
From: Allen Furlan	Read Replies (1) \| Respond to of 78525

Jurgis, re options. Are you familiar with the term "notional value" as it applies to derivatives? JPM has exposure to 30 TRILLION in notional value mostly to interest rate derivatives. I have jnpr 01/03 200 calls naked and assume that the notional exposure in each option is $20,000, although my exposure is nil(<$5). If this is meaning of notional then it would be very difficult to discern just how much risk JPM really has. In any case they are a hedge fund masquerading as a bank.

To: Jurgis Bekepuris who wrote (15056)	8/5/2002 9:32:34 AM
From: TimbaBear	Respond to of 78525

Jurgis: Jim, Sorry, no go. Dell has put obligations to buy shares... at $45 or so. And they have to do this whether they want or not - the put buyers are not going to allow puts expire in money. Dell can then retire the purchased shares, but the problem is they would be paying $45 and not $24 per share. Below is a link to the historical prices for DELL for the period of their last 10K (02/01/01--01/31/02). It appears to me that, during this period, they never once closed above $30.00/share so your assessment appears to be validated. If DELL could simply fulfill the put obligation with shares, then their AVERAGE cost to buy the 68 million shares would have been more reflective of the market pricing instead of the $44.12/share it was (3 billion/68 million). This historical look at prices and what it reveals about the true nature of their liability really makes it seem to me like they grossly misled the shareholders when they said: "...The outstanding put obligations at February 1, 2002 permitted net share settlement at the Company’s option and, therefore, did not result in a liability on the accompanying Consolidated Statement of Financial Position..." Historical Prices table.finance.yahoo.com Timba