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To: rudedog who wrote (114179)	4/4/1999 5:01:00 PM
From: Lockeon	Respond to of 176387

Rudedog, I bow to your experience..... Have a GREAT evening and a better week ahead... Highest regards....

To: rudedog who wrote (114179)	4/4/1999 5:17:00 PM
From: Chuzzlewit	Respond to of 176387

Rudedog and thread, I do not believe that Dell buys call options. I have gone through the 1998 10-K carefully, and find no mention of it. You will note, however that Dell sell's put options, and these transactions are listed in several places. The following posts were extracted from the 1998 10-K and should be read by all shareholders: DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IN MILLIONS) ASSETS FEBRUARY 1, FEBRUARY 2, 1998 1997 ----------- ----------- Current assets: Cash...................................................... $ 320 $ 115 Marketable securities..................................... 1,524 1,237 Accounts receivable, net.................................. 1,486 903 Inventories............................................... 233 251 Other..................................................... 349 241 ------ ------ Total current assets.............................. 3,912 2,747 Property, plant and equipment, net.......................... 342 235 Other....................................................... 14 11 ------ ------ Total assets...................................... $4,268 $2,993 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $1,643 $1,040 Accrued and other......................................... 1,054 618 ------ ------ Total current liabilities......................... 2,697 1,658 Long-term debt.............................................. 17 18 Deferred revenue on warranty contracts...................... 225 219 Other....................................................... 36 13 Commitments and contingent liabilities...................... -- -- ------ ------ Total liabilities................................. 2,975 1,908 ------ ------ Put options................................................. -- 279 ------ ------ Stockholders' equity: Preferred stock and capital in excess of $.01 par value; shares issued and outstanding: none.................... -- -- Common stock and capital in excess of $.01 par value; shares issued and outstanding: 644 and 692, respectively........................................... 747 195 Retained earnings......................................... 607 647 Other..................................................... (61) (36) ------ ------ Total stockholders' equity........................ 1,293 806 ------ ------ $4,268 $2,993 ====== ====== The accompanying notes are an integral part of these consolidated financial statements. DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF INCOME (IN MILLIONS) FISCAL YEAR ENDED ----------------------------------------- FEBRUARY 1, FEBRUARY 2, JANUARY 28, 1998 1997 1996 ----------- ----------- ----------- Net revenue............................................. $12,327 $7,759 $5,296 Cost of revenue......................................... 9,605 6,093 4,229 ------- ------ ------ Gross margin.......................................... 2,722 1,666 1,067 ------- ------ ------ Operating expenses: Selling, general and administrative................... 1,202 826 595 Research, development and engineering................. 204 126 95 ------- ------ ------ Total operating expenses...................... 1,406 952 690 ------- ------ ------ Operating income.............................. 1,316 714 377 Financing and other..................................... 52 33 6 ------- ------ ------ Income before income taxes and extraordinary loss..... 1,368 747 383 Provision for income taxes.............................. 424 216 111 ------- ------ ------ Income before extraordinary loss...................... 944 531 272 Extraordinary loss, net of taxes........................ -- (13) -- ------- ------ ------ Net income............................................ 944 518 272 Preferred stock dividends............................... -- -- (12) ------- ------ ------ Net income available to common stockholders............. $ 944 $ 518 $ 260 ======= ====== ====== Basic earnings per common share (in whole dollars): Income before extraordinary loss...................... $ 1.44 $ 0.75 $ 0.36 Extraordinary loss, net of taxes...................... -- (.02) -- ------- ------ ------ Earnings per common share............................. $ 1.44 $ 0.73 $ 0.36 ======= ====== ====== Diluted earnings per common share (in whole dollars): Income before extraordinary loss...................... $ 1.28 $ 0.68 $ 0.33 Extraordinary loss, net of taxes...................... -- (.02) -- ------- ------ ------ Earnings per common share............................. $ 1.28 $ 0.66 $ 0.33 ======= ====== ====== Weighted average shares outstanding: Basic................................................. 658 710 716 Diluted............................................... 738 782 790 The accompanying notes are an integral part of these consolidated financial statements. DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (IN MILLIONS) FISCAL YEAR ENDED --------------------------------------- FEBRUARY 1, FEBRUARY 2, JANUARY 28, 1998 1997 1996 ----------- ----------- ----------- Cash flows from operating activities: Net income............................................... $ 944 $ 518 $ 272 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................... 67 47 38 Other............................................... 24 29 22 Changes in: Operating working capital............................. 529 659 (195) Non-current assets and liabilities.................... 28 109 38 -------- ------- ------- Net cash provided by operating activities........ 1,592 1,362 175 -------- ------- ------- Cash flows from investing activities: Marketable securities: Purchases............................................. (12,305) (9,538) (4,545) Maturities and sales.................................. 12,017 8,891 4,442 Capital expenditures..................................... (187) (114) (101) -------- ------- ------- Net cash used in investing activities............ (475) (761) (204) -------- ------- ------- Cash flows from financing activities: Purchase of common stock................................. (1,023) (495) -- Repurchase of 11% Senior Notes........................... -- (95) -- Issuance of common stock under employee plans............ 88 57 48 Cash received from sale of equity options................ 38 -- -- Preferred stock dividends and other...................... (1) -- (14) -------- ------- ------- Net cash (used in) provided by financing activities..................................... (898) (533) 34 -------- ------- ------- Effect of exchange rate changes on cash.................... (14) (8) 7 -------- ------- ------- Net increase in cash....................................... 205 60 12 Cash at beginning of period................................ 115 55 43 -------- ------- ------- Cash at end of period...................................... $ 320 $ 115 $ 55 ======== ======= ======= DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (IN MILLIONS) PREFERRED STOCK AND CAPITAL IN COMMON STOCK AND EXCESS OF PAR CAPITAL IN EXCESS VALUE OF PAR VALUE ---------------- ------------------ RETAINED SHARES AMOUNT SHARES AMOUNT EARNINGS OTHER TOTAL ------ ------ ------- ------- -------- ----- ------- Balances at January 29, 1995.......... 1 $ 120 635 $ 242 $ 311 $(21) $ 652 Net income.......................... -- -- -- -- 272 -- 272 Stock issuance under employee plans, including tax benefits........... -- -- 33 74 -- (17) 57 Preferred stock conversion.......... (1) (114) 80 114 -- -- -- Other............................... -- -- -- -- (13) 5 (8) Balances at January 28, 1996.......... -- 6 748 430 570 (33) 973 Net income.......................... -- -- -- -- 518 -- 518 Stock issuance under employee plans, including tax benefits........... -- -- 6 65 -- (18) 47 Purchase and retirement of 62 million shares................... -- -- (62) (22) (388) -- (410) Purchase and reissuance of 19 million shares for employee plans and preferred stock conversion... -- (6) -- -- (55) -- (61) Reclassification of put options..... -- -- -- (279) -- -- (279) Other............................... -- -- -- 1 2 15 18 Balances at February 2, 1997.......... -- -- 692 195 647 (36) 806 Net income.......................... -- -- -- -- 944 -- 944 Stock issuance under employee plans, including tax benefits........... -- 21 274 -- (11) 263 Purchase and retirement of 69 million shares................... -- (69) (39) (984) -- (1,023) Reclassification of put options..... -- -- -- 279 -- -- 279 Other............................... -- -- -- 38 -- (14) 24 Balances at February 1, 1998.......... -- $ -- 644 $ 747 $ 607 $(61) $ 1,293 -- More to come--

To: rudedog who wrote (114179)	4/4/1999 5:19:00 PM
From: Chuzzlewit	Respond to of 176387

Part 2 on Dell options Stock-Based Compensation -- The Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," in the fiscal year ended February 2, 1997. On adoption, the Company continued to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its stock option and stock purchase plans. As a result, no expense has been recognized for options granted with an exercise price equal to market value at the date of grant or in connection with the employee stock purchase plan. For stock options that have been issued at discounted prices, the Company accrues for compensation expense over the vesting period for the difference between the exercise price and fair market value on the measurement date. FISCAL YEAR ENDED ----------------------------------------- FEBRUARY 1, FEBRUARY 2, JANUARY 28, 1998 1997 1996 ----------- ----------- ----------- (IN MILLIONS, EXCEPT PER SHARE DATA) Net income.............................................. $ 944 $ 518 $ 272 Less: preferred stock dividends......................... -- -- (12) ----- ----- ----- Net income available to common stockholders............. $ 944 $ 518 $ 260 ===== ===== ===== Weighted average shares outstanding -- Basic............ 658 710 716 Employee stock options and other........................ 80 72 74 ----- ----- ----- Weighted average shares outstanding -- Diluted.......... 738 782 790 ===== ===== ===== Earnings per common share: Basic................................................. $1.44 $0.73 $0.36 Diluted............................................... $1.28 $0.66 $0.33 NOTE 7 -- COMMON STOCK Authorized Shares -- During fiscal 1998, the Company's stockholders approved an increase in the number of authorized shares of common stock to one billion from three hundred million at the end of fiscal 1997. Stock Split -- On each of March 6, 1998 and July 25, 1997, the Company effected a two-for-one common stock split by paying a 100% stock dividend to stockholders of record as of February 27, 1998 and July 18, 1997, respectively. All share and per share information has been retroactively restated in the Consolidated Financial Statements to reflect these stock splits. Stock Repurchase Program -- The Board of Directors has authorized the Company to repurchase up to 250 million shares of its common stock in open market or private transactions. During fiscal 1998 and fiscal 1997, the Company repurchased 69 million and 81 million shares of its common stock, respectively, for an aggregate cost of $1.0 billion and $503 million, respectively. The Company utilizes equity instrument contracts to facilitate its repurchase of common stock. At February 1, 1998 and February 2, 1997, the Company held equity instrument contracts that relate to the purchase of 50 million and 36 million shares of common stock, respectively, at an average cost of $44 and $9 per share, respectively. Additionally, at February 1, 1998 and February 2, 1997, the Company has sold put obligations covering 55 million and 34 million shares, respectively, at an average exercise price of $39 and $8, respectively. The equity instruments are exercisable only at expiration, with the expiration dates ranging from the first quarter of fiscal 1999 through the third quarter of fiscal 2000. At February 2, 1997, certain outstanding put obligations contained net cash settlement or physical settlement terms thus resulting in a reclassification of the maximum potential repurchase obligation of $279 million from stockholders' equity to put warrants. The outstanding put obligations at February 1, 1998 permitted net-share settlement at the Company's option and, therefore, did not result in a put warrant liability on the balance sheet. The equity instruments did not have a material dilutive effect on earnings per common share for fiscal 1998 or fiscal 1997. NOTE 8 -- BENEFIT PLANS Incentive and Employee Stock Purchase Plans -- The Dell Computer Corporation Incentive Plan (the "Incentive Plan"), which is administered by the Compensation Committee of the Board of Directors, provides for the granting of incentive awards in the form of stock options, stock appreciation rights ("SARs"), restricted stock, stock and cash to directors, executive officers and key employees of the Company and its subsidiaries, and certain other persons who provide consulting or advisory services to the Company. Options granted may be either incentive stock options within the meaning of Section 422 of the Internal Revenue Code or nonqualified options. The right to purchase shares under the existing stock option agreements typically vests pro-rata at each option anniversary date over a five-year period. Stock options must be exercised within ten years from date of grant. Stock options are generally issued at fair market value. Under the Incentive Plan, each nonemployee director of the Company automatically receives nonqualified stock options annually.

To: rudedog who wrote (114179)	4/4/1999 5:21:00 PM
From: Chuzzlewit	Read Replies (3) \| Respond to of 176387

Part 3 -- Dell options -- The following table summarizes stock option activity: FISCAL YEAR ENDED --------------------------------------------------------- FEBRUARY 1, 1998 FEBRUARY 2, 1997 JANUARY 28, 1996 ----------------- ----------------- ----------------- WEIGHTED WEIGHTED WEIGHTED NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE OF EXERCISE OF EXERCISE OF EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ -------- ------ -------- ------ -------- (SHARE DATA IN MILLIONS) Outstanding at beginning of year... 113 $ 3.89 94 $2.10 90 $1.13 Granted............................ 22 $27.21 43 $6.58 32 $3.91 Canceled........................... (5) $ 6.19 (7) $2.34 (8) $1.02 Exercised.......................... (20) $ 3.02 (17) $1.50 (20) $1.05 --- --- --- Outstanding at end of year......... 110 $ 8.99 113 $3.89 94 $2.10 === === === Exercisable at year-end............ 25 $11.90 19 $1.81 19 $1.30 The following is additional information relating to options outstanding as of February 1, 1998: OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------- ------------------- WEIGHTED WEIGHTED WEIGHTED EXERCISE NUMBER AVERAGE AVERAGE NUMBER AVERAGE PRICE OF EXERCISE CONTRACTUAL OF EXERCISE RANGE SHARES PRICE LIFE (YEARS) SHARES PRICE - --------------- ------ -------- ------------ ------- --------- (SHARE DATA IN MILLIONS) $ 0.01 - $ 1.99 28 $ 1.16 5.8 12 $ 1.38 $ 2.00 - $ 4.99 27 $ 3.61 7.5 7 $ 3.47 $ 5.00 - $ 9.99 27 $ 6.16 8.3 4 $ 6.18 $10.00 - $19.99 14 $14.08 8.9 2 $11.24 $20.00 - $50.50 14 $36.00 9.4 -- $ -- --- -- 110 25 === == During fiscal 1998, 1997 and 1996 the Company granted 1 million shares, 3 million shares and 6 million shares, respectively, of restricted stock. For substantially all restricted stock grants, at the date of grant, the recipient has all rights of a stockholder, subject to certain restrictions on transferability and a risk of forfeiture. Restricted shares typically vest over a seven-year period beginning on the date of grant and restrictions may not extend more than ten years from the date of grant. The Company records unearned compensation equal to the market value of the restricted shares on the date of grant and charges the unearned compensation to expense over the vesting period. There were 10 million, 29 million and 68 million shares of common stock available for future grants under the Incentive Plan at February 1, 1998, February 2, 1997, and January 28, 1996, respectively. The Company also has an employee stock purchase plan that qualifies under Section 423 of the Internal Revenue Code and permits substantially all employees to purchase shares of common stock. Participating employees may purchase common stock through payroll deductions at the end of each participation period at a purchase price equal to 85% of the lower of the fair market value of the common stock at the beginning or the end of the participation period. Common stock reserved for future employee purchases under the plan aggregated 13 million shares at February 1, 1998, 15 million shares at February 2, 1997, and 19 million shares at January 28, 1996. Shares issued under this plan were 2 million shares in fiscal 1998, 3 million shares in fiscal 1997 and 3 million shares in fiscal 1996. The weighted average fair value of stock options at date of grant was $16.26, $3.73, and $2.22 per option for options granted during fiscal years 1998, 1997, and 1996, respectively. Additionally, the weighted average fair value of the purchase rights under the employee stock purchase plan granted in fiscal years 1998, 1997, and 1996 was $6.11, $2.04, and $1.01 per right, respectively. The weighted average fair value of options was determined based on the Black-Scholes model, utilizing the following weighted average assumptions: FISCAL YEAR ENDED ------------------------------------------------------ FEBRUARY 1, 1998 FEBRUARY 2, 1997 JANUARY 28, 1996 ---------------- ---------------- ---------------- Expected term: Stock options................................ 5 years 5 years 5 years Employee stock purchase plan................. 6 months 6 months 6 months Interest rate.................................. 6.28% 6.40% 6.20% Volatility..................................... 54.92% 56.54% 57.36% Dividends...................................... 0% 0% 0% Had the Company accounted for its stock option and stock purchase plans by recording compensation expense based on the fair value at the grant date on a straight line basis over the vesting period, stock-based compensation costs would have reduced pretax income by $100 million ($69 million, net of taxes), $22 million ($16 million, net of taxes) and $8 million ($6million, net of taxes) in fiscal 1998, 1997 and 1996, respectively. The pro forma effect on diluted earnings per common share would have been a reduction of $0.09, $0.02 and $0.01 for fiscal years 1998, 1997 and 1996, respectively. The pro forma effect on basic earnings per common share would have been a reduction of $0.11, $0.02 and $0.01 for fiscal years 1998, 1997 and 1996, respectively. 401(k) Plan -- The Company has a defined contribution retirement plan that complies with Section 401(k) of the Internal Revenue Code. Substantially all employees in the U.S. are eligible to participate in the plan. The Company matches 100% of each participant's voluntary contributions, subject to a maximum Company contribution of 3% of the participant's compensation. During each of fiscal 1998, fiscal 1997 and fiscal 1996, the Company made discretionary contributions for every eligible employee, regardless of whether the employee was a plan participant, equal to 2% of the employee's actual earnings during calendar years 1997, 1996 and 1995, respectively. The Company's matching and discretionary contributions during fiscal years 1998, 1997 and 1996 were $20 million, $13 million and $10 million, respectively.

To: rudedog who wrote (114179)	4/4/1999 9:28:00 PM
From: Meathead	Read Replies (2) \| Respond to of 176387

Employee Stock Options Hi Rudedog. While I generally agree with your assessment of ESOP's and the motivational breakdown that can occur in some individuals, let me offer the thread some insight into my experience in dealing with some of the Dell elite. I have known quite a few Dell folks over the last decade. Many are now super wealthy... tens of millions in individual net worth. What has surprised me the most is that many have not retired nor do they plan to in the near future. Sounds counter-intuitive doesn't it? If it's no longer about the money, where does the motivation to continue come from? This has been a hot topic of conversation once business is out of the way and the personal stuff ensues. "But Jim, you're worth over $20 million!...." "Yeah, but I'm only 40, I'm too young to retire, what will I do? This is what I do and I do it better than anyone... I like it that way..." The psychological aspect of this somewhat unique phenomenon isn't difficult understand and it seems to exhibit commonalities where early retirement plans have been scrapped. For years, these individuals have poured their heart, soul and intellect into their profession and it has become their identity. It's no longer a burdensome 9-5 job but a source of pride and accomplishment. The fear of failure has been eliminated and along with it, much of the associated job induced stress. Furthermore, these individuals feel that they are more effective in their positions than ever. They feel a great sense of accomplishment by mentoring others and helping the company avoid many of the common mistakes made by the younger, more aggressive and less experienced employees. They have become the elder statesmen of their profession who truly enjoy getting up and going to work and would feel lost and disconnected if they prematurely severed the corporate umbillical cord. Is this level of compensation deserved? Most would say no. But it probably was never intended to be, it just became that way. God bless capitalism. Interestingly, if you asked these folks ten years ago what they would do it they had a million dollars, the overwhelming response would be "Oh, I'd retire in a minute". Funny how we're positive that we know exactly what we'd do in a position we assume we'll never be in. While there has been a wave of early retirements at Dell, those who remain aren't generally sucking off the corporate fat. Of course there are exceptions as you noted, those who got lucky and are well off enough now but won't leave un-vested money on the table. These guys will be gone in 2001-2002. Sure, a certain percentage of them are performing just well enough not to get fired. But I'd bet 90% still put a lot of effort into their profession.... I mean really, how many folks actually have so little pride that they can handle being viewed as a no-op by their peers day in and day out? The Dell culture is not conducive to hiding in a corner and shirking responsibility. Closing thoughts. Options that can create this kind of wealth are generally only granted to stellar performers... a relatively small percentage. Stellar performers don't happen by accident. A strong work ethic, a desire to be the best, to win and be admired by your peers are a prerequisite. These traits don't suddenly vanish when you become rich. Enjoy your posts.. MEATHEAD