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Technology Stocks : Deswell Industries (DSWL) -- Ignore unavailable to you. Want to Upgrade?

To: Ron Bower who wrote (1022)	10/12/1998 9:05:00 AM
From: Terrapin	Read Replies (1) \| Respond to of 1418

Richard, Michael, j., Thanks for the replies. Upon re-reading my message I can see where I wasn't clear. When I said "support the shareprice" I meant retiring the shares, increasing EPS and decreasing dividend payouts which would stabilize indirectly the shareprice at any given PE value. Indeed, it would be a terrific ROI if there were no external factors involved. And that is the crux of my argument: a stock buyback is not necessary given the current uncertainties. The case outlined by Richard would make complete sense for a domestic company in a secure market that isn't threatened by the kinds problems that DSWLF may be facing. It assumes that DSWLF's business will not be materially affected. We know for a fact that Mita is decreasing orders. We've been told that they may come back on line later but it isn't a fact until it happens. We've also been told that other suppliers may be increasing orders along with new customers but I'm not counting those chickens yet. Not that I distrust management - they appear to be of the highest caliber - I'm just naturally suspicious ;) So why no buyback yet? If we believe management then Ron's scenario makes sense: expectations of increased orders require capital for expansion or acquisition. This doesn't rule out a buyback if they have enough to fill their orders and make the dividend (can you tell I'm concerned about the dividend? :) ). If we assume that DSWLF is NOT immune to the troubles in Asia and elsewhere (as the Mita announcement suggests) then I wouldn't expect to see a buyback because management will need the US$ to weather a few years of rotten business in the face of their recently expanded facilities. In this case orders will be suspended, earnings will drop, the dividend might be cut and God knows what else. The US$ will allow the company to survive where competitors will fail. Of course, I have no idea. I'm just trying to keep an eye on my dividend. I certainly would not refuse a buyback if it is justifiable given the company's situation. For many domestic (and European) companies it makes perfect sense but for DSWLF it may not. Perhaps a word from management would help me relax. The confidence of the posters to this thread has been a comfort during the recent decline. Cheers, John

To: Ron Bower who wrote (1022)	10/12/1998 10:59:00 AM
From: Richard Barron	Read Replies (3) \| Respond to of 1418

Ron, I agree entirely with your scenario and many other possible situations. I was just pointing out that the repurchasing shares has an incredible potential return if earnings are still there, and would actually make the long term prospects of the dividend more secure since more of the company's profits would stay with the company in the future. Short term, cash is great. I just hope that they don't try something like an LBO at a ridiculously cheap price. Richard