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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: burn2learn who wrote (12992)	12/3/1998 6:28:00 PM
From: Fred Fahmy	Read Replies (1) \| Respond to of 13925

<Creative is not an investor. > Well, of course they are! Whenever CREAF buys a share they are investing directly in the company by spreading the same shareholder equity over less shares. Similarly, earnings and cash are spread over fewer shares. <If the company does well and the stock reacts to normal conditions, meaning good earnings and growth then no share buyback is needed.> I think you are missing a huge fundamental reality of stock repurchases. Buybacks make the shares you own inherently worth more since there are fewer. Each shares represents more of the company as the total number of shares outstanding decreases. There are several ways to return value to investors. Capital appreciation is one way (which we haven't seen over the last year), another way is to give you a bigger piece of the company (via a buyback), another way is to pay you a cash dividend. I think the last method is the least affective and shortest lived. Reducing the number of outstanding shares is a good way to return value to the shareholders while we wait for the price to appreciate and catch up to the fundamentals. P.S. I strongly oppose buybacks when companies buy back their own stocks at prices which are ahead of their fundamentals (i.e. when their shares are overpriced). However, when shares of a company are this undervalued and they have the ability to return value to the investors, then they should act. FF