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

To: SiliconAlley who wrote (60034)	3/31/2016 12:34:19 PM
From: joncon63	6 Recommendations Recommended By alanrs Bruno Cipolla david1951 JCnieuwenj SSDiesel and 1 more member Read Replies (1) \| Respond to of 60323

SA, I'd be a whole lot more interested in your thoughts on WDC ability to handle the debt at these rates rather than picking apart any post Art makes. You have said that you were converting the bulk of your SNDK holdings to WDC prior to the closing. Looks like the interest costs are going to be significantly higher than originally anticipated. Your thoughts on this? Thanks

To: SiliconAlley who wrote (60034)	3/31/2016 12:38:15 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

". . . Are the WDC bond underwriters evil for wanting to maximize returns? Is WDC management evil for purchasing Sandisk with borrowed funds?" My point is that the underwriters clearly understand the risks involved and are pricing the notes accordingly. The secured note has a high interest rate because, even though it is secured, it is risky. The junk bonds are just that -- junk. What you may have missed is that the greater the leverage on the balance sheet, the greater the risks for shareholders. Remember that if revenues get a little soft because of slower than expected growth, a company with this much leverage could go broke, and the shareholders would get NOTHING until after the bonds, both the secured and junk bonds, were paid off. As I said, the SanDisk deal is a good one, but I'm still wondering whether it is affordable for WDC. If worldwide economic growth were stronger, especially in the U.S., China, and Europe, I would worry less. Art