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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (26689)	3/13/1998 10:56:00 PM
From: Earlie	Read Replies (1) \| Respond to of 132070

SB: Dell's shelf registration really got to me last night, so I stuck a little note on Pete's thread to "explain" how and why. (g) What a bunch of bounders. Sell great wads of your exercised cheap stock options into a market that you have "propped up" through stock buy-backs. Finance the "prop-up" by draining the company's cash or putting the firm into the debt hole. Brilliant leadership. Best, Earlie

To: Skeeter Bug who wrote (26689)	3/14/1998 5:36:00 PM
From: Knighty Tin	Respond to of 132070

Skeets, Of course, when IBM can manipulate their crummy stocks up by borrowing to buy back shares, a company like Dell, which actually has some business behind their bloated stock price, will do and has done the same. However, you have to look at causation here. If you ask Dell if they are borrowing to buy back stock, the answer would be no. They are borrowing to make needed corporate expenditures. They spent their cash flow to buy back stock. -g- This is very similar to borrowing from a shylock to bet on the horses. Of course you would never do that. You spend your paycheck to bet on the horses and you borrow from the shylock to buy food and pay the rent. -g- The point being, both tactics lead to broken kneecaps at some point in time. Companies like Dell claim that there is no capital investment they can make with their cash flow that is as good a deal as their own stock. But they ignore the fact that they have to make those capital investments no matter what. Convoluted logic. -g- This goes hand in hand with my contention that there is little free cash flow in the tech business, even for a hugely successful outfit like Dell. If their cash flow was really free and they used it to buy back stock, I still wouldn't like it, but it's no big deal. However, when the cap spending has to be made with debt, you know that cash flow they wasted was never free. MB