Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (38244)	4/17/1998 3:25:00 PM
From: SecularBull	Respond to of 176387

Quit pointing out the obvious truth. It just confuses him.

To: Chuzzlewit who wrote (38244)	4/17/1998 4:55:00 PM
From: Jim Patterson	Respond to of 176387

Chuzzlewit, I understand the benefits and the Risks of Leverage. Buybacks help EPS numbers, and the debt hurts them. In the short run, if you do both, you will get the best of both worlds, but in the long run, you are depleating resources that might be better utilized in a time of need. There are several companies that have beaten expectation in the last few years because of their buy back programs, Dell included. The idea behind IPOs and Secondary offerings is to raise capital to either expand operations or pay off long-term debt. That is what I learned in College anyway. Today, Most secondaries are to sell stock of insiders with a small percentage of the proceeds going to the company. That is why so many of them are not very dilutive. This is my opinion, If I were running a company such as Dell that is not extremely capital intensive, I would avoid Debt at all costs. Why take on the risk of interest payments when cash flow is sufficient. DELL will have a cash flow problem at some point in the future, All companies do, it is just part of the life cycle of a company. Why not wait until then to use the debt option? Maybe this is just my conservative nature when it comes to debt. We both know that DELL is generating Cash. That internally generated cash has paid for most of their expansion so far. Why is DELL not going to continue to do things the way they have in the past? I see this as a change in direction of management. Maybe I am missing something here. You seem to think I am so I might be. Do you agree with me on this being a change from past operating procedures? If you do agree, then can you explain why the change? In your explanation don't refer to the features and benefits of Leverage, Refer to why DELL's management thinks it is better to use debt in April 1998 when it never has before. In the 15-20 years of DELL's existence, they never went that way, Why now? I refer to IBM because IBM is doing the same thing, Issuing debt to buy back stock. However, IBM has a book value, large assets to back up the debt with. DELL does not have large assets, hence the Bbb rating. As a shareholder, You hate to see the buyback stop, but I think I would rather see that than the Debt issued if you are a long-term holder. Have a nice weekend Jim