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Technology Stocks : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: Mark Adams who wrote (13510)	1/29/1998 10:07:00 PM
From: Nikole Wollerstein	Respond to of 25960

" But I have to wonder if their cash flow is sufficient to support buybacks." CYMI has 132 $ mln in cash. It is more than 4$/share

To: Mark Adams who wrote (13510)	1/29/1998 10:58:00 PM
From: ben luong	Respond to of 25960

Actually, there is advantage to call the bonds back at this time because the bond is selling at a premium due to the drop in interest rate since the date the bond was issued. This means that CYMI can earn a profit of the difference between the current market price of the bond and the initial IPO price. In addition, calling the bond back would force the bond holders to buy back the CYMI shares they short and thus jack up the stock price. Redeeming the bonds has the effect of increasing the diluted EPS and not the basic EPS since only diluted EPS takes into account of the converted shares. My take on this is that CYMI believes the current stock price is so cheap that buying back the shares now will increase the EPS (both basic and diluted) more than they can by spending on hiring more people, R&D, etc. They also believe by buying back the stocks right now, they can sell them at a much higher price later on. Buying back also will add support and stabilize the stock price. It also works to the advantage of management since they can use the purchased shares to fund their employee stock option plan. In short, management is so confident that if they buy back the stocks right now, they can make substantial profits when they sell them later on (this will also increase the EPS). As far as to the argument of increasing financial levelage by not recalling the bonds, I think it is faulted because CYMI already has too much cash at hand right now that they probably won't be able to get more than 10% return (the interest they paid out for the bond)if they invest these bond money into anything other than repurchasing it own common stock.