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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (2903)	10/20/1998 2:31:00 PM
From: Tom Smith	Read Replies (1) \| Respond to of 4509

Chuzz, I agree with you regarding the financial implications of a stock buyback (i.e., no real change in the "value" per share.) I guess I wasn't clear in my original statement. I am hoping for a buyback not as a mechanism to force the stock price upward, but rather as a clear, unequivocal statement from management that the current price represents a compelling value given the foreseeable prospects for the company. I look at it very much like insider buying. You said "the best use of cash is to invest it in the business by expanding if the expected return exceeds certain financial hurdle rates." This is true, but suppose that PeopleSoft management looks around and the best opportunity they can find for cash deployment will produce an estimated 20% annual return. If they also believe that the company as it currently exists will grow 40% per year, we are better off if they buy back PSFT stock rather than invest in the 20% return option. They would effectively be saying to us, "forget Y2K, forget SAP discounting, forget market 'saturation' -- we can find no better investment of our cash than a purchase of the stock at the current price." Tom