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

To: Chuzzlewit who wrote (80283)	11/14/1998 10:58:00 PM
From: BGR	Read Replies (2) \| Respond to of 176387

CTC, Share buybacks and retirement do add to _shareholder value_ though not to the total company value. Assuming that company value remains unchanged before and after the buyback, since the company ownership is now distributed among fewer shareholders, the value for each remaining shareholder goes up. For example, let's consider a company with zero excess cash in hand (all earnings re-invested) which takes on debt to buy back shares. The bondholder value goes down as now there is more outstanding debt for the same collateral (the company) but shareholder value goes up as now there is less ownership for the company. In other words, value is distributed from bondholders to shareholders. In general, if the company has excess cash flow it can either buy back it's debt thereby increasing bondholder value or buy back it's stock thereby increasing shareholder value. If a company buys back it's debt, it's debt rating goes up, thus bond values go up and bond interest rates go down. If it buys back shares (and retires those) a similar phenomenon should be expected as well resulting in share price appreciation (other things remaining the same). That is, the diluted EPS is in effect being used. Hence the diluted EPS growth is what counts. -Apratim.

To: Chuzzlewit who wrote (80283)	11/15/1998 8:01:00 AM
From: Richard Tsang	Read Replies (1) \| Respond to of 176387

CTC, thank you very much for the insights and reference materials. Glad that you agree that we need to look at real earnings growth (55% for Dell Q3) not the inflated 65%. Unfortunately, that last number has been quoted more often by many, including MD himself. To maintain an inflated EPS growth will continue to be a challenge. I also agree what you have laid out regarding stock options. I must point out though, that is, most options are granted with a strike price at or higher than the market price at time of grant. The optionees can only benefit when the employees perform, which impacts the company performance, which in turn impacts the stock price. Dell would not have come this far without this long term incentive plan for the management and employees. I don't think any company would issue options with a strike price of $10 when the market price is $100, as cited in your example. These options will become dilutive only when they are "in the money". Having said that, there are some companies repricing some of these options when they are "under water". Not a good practice but I believe they wouldn't have done it had they found a better alternative. I attended the last annual conference of the National Association of Stock Plan Professionals (NASPP),of which I am a member, in Las Vegas last month. There were 1100 participants for a 2 1/2 day program. I was amazed how this thing has spread. The membership to this organization has doubled in the last 3 years. This business has created a lot of jobs for the people involved in managing these programs. Try their web site: naspp.com Anyone can join. I will do more research on Dell. Again thank you for sharing. RT