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

To: Meathead who wrote (52254)	7/18/1998 11:38:00 PM
From: Sig	Read Replies (1) \| Respond to of 176387

Meathead: The way I read this news item about INTC is that newer and faster chips are being produced by intc on an expedited schedule despite the cutback in new plants. This should give Dell the opportunity to emphasize delivery of latest and best technology with a positive effect on sales while helping maintain ASP's. news.com Go Dell(g) Sig

To: Meathead who wrote (52254)	7/19/1998 1:18:00 AM
From: Chuzzlewit	Read Replies (3) \| Respond to of 176387

Meathead, you are missing several points here. First, because an expenditure doesn't run through the income statement doesn't render it any less real. Second, you assumed that granting options created a situation with employee stock ownership. It does not. what happens is that as soon as the options are exercised the stock is sold. This creates dilution for everybody including current employees owning stock. That's why following insider sales is meaningless. Third, the difference between the exercise price of the option and the market value of the stock represents a real cost. But the cost is not borne directly by the company. It is borne by existing shareholders in the form of dilution. Fourth, you assumed away the value of cash. For example, if the company could dividend excess cash to shareholders the shares would obviously be worth less when it is trading ex-dividend to the extent of the dividend. That's why holding period rates of return always include dividends. If the bonuses were paid in cash shareholders would realize two advantages. First, they would get a true picture of the costs to run the business. Second, they would avoid the inevitable dilution that accompanies these transactions. Don't be fooled by the fact that Dell is a net purchaser of shares. You should really separate the transactions so that they make more sense. Dell grants stock options. There is a cost to this transaction. Dell repurchases shares. This is separate and distinct from the issuance of options. The use of such generous option packages is a relatively new phenomenon. I think it is a big mistake. I also think the motivation is to hide the true costs from shareholders. This criticism is aimed at all companies that engage in this practice. You should also be aware that the greatest recipients of this shareholder largesse are the very few people occupying the highest levels of corporate management -- the CEOs and CFOs and Directors. It is one more example of executive greed at the expense of the shareholder. I believe that if more shareholders were aware of the insidious nature of this practice there would be a general uproar. TTFN, CTC