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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (60002)	3/16/2016 10:12:51 AM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Interest rates are close to historic lows. Issuing convertible debt (e.g., bonds that convert into stock when the stock reaches a certain predetermined level) generally provides an even lower interest rate, coupled with the feature that as the bonds are converted, the company balance sheet shows a reduction in debt (liability) and a corresponding increase in assets. My concerns are related less to actual interest rates and more to TOTAL debt service costs. When a company takes on debt in order to further its business, it is called leveraging the business. That is, you increase the return on asset value because the additional debt reduces asset value. This works well, provided that the company is able to increase its income from operations. If not, then the extra debt service costs drag down overall profits. My chief concern about WDC shares as an investment is related to the potential adverse impact of some $19 billion of new debt created in order to finance the purchase of SNDK. In the short run, this debt could cause WDC profits to fall, maybe even to the point where WDC would have to cut or eliminate its dividend. On the other hand, without the benefits of SNDK solid state memory technology, WDC faces a gradual decline in its hard drive business. Art