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

To: Chuzzlewit who wrote (114184)	4/4/1999 10:39:00 PM
From: LWolf	Respond to of 176387

chuzz...I've printed out the 3 posts for Dell's 10K & option activity... what's the bottom line from your point of view. Based on your original, first statement that DELL sells puts... that very bullish... it's more cost effective than buying calls. If I knew which puts they were selling I'd SELL with them! laura PS Where's Don Martini... he should be aware of this!!!

To: Chuzzlewit who wrote (114184)	4/5/1999 2:18:00 AM
From: jim kelley	Read Replies (1) \| Respond to of 176387

CTC, It seem to me that DELL is picking these ESOP options up at below the grant date price because they are selling puts on the stock they intend to buyback. So to get a balanced view of the actual cost of the stock grants to employees this other process needs to be accounted for. I am too lazy to do the calculation..... I was hoping you would address this as it is your cup of cat food. Regards, Jim Kelley

To: Chuzzlewit who wrote (114184)	4/5/1999 1:20:00 PM
From: jbn3	Read Replies (1) \| Respond to of 176387

re DELL options activity and ESOP Chuz, Your posts on DELL's options' position and funding of ESOPs taken from the 1998 annual report. Part 1: Message 8697577 Part 2: Message 8697585 Part 3: Message 8697597 Although long-timers on the thread knew that DELL does use options to help fund its stock buy-backs (as well as where to find the data), many newcomers may not have known. Thank you for a series of very useful and beneficial posts. Comment 1: In Part 1, the data shows that from 28/1/1996 to 2/2/1997, $279 Million of put options were 'reclassified'. From Part 2 of your posts, here is the company's explanation: ...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. ... Could you explain to us in layman's terms what that means? Comment 2: I believe that DELL *does* historically sell puts and buy calls on its stock. Examine the share price data of repurchased stock for any time period, and you will find that at no time during the time period did the stock price drop remotely near the point of purchase. Here is the pertinent data from Part 2. ... 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. ... I understand this to mean that DELL does indeed buy and exercise long-term call options on its stock. However, I read a cautionary sub-text into the last sentence, "... through the third quarter of fiscal 2000. ...". I can only guess as to whether the limit of OCT 1999, was an arbitrary one caused by management's uncertainty about potential Y2K impact on market conditions (my choice); whether it was an inherent limitation imposed by the characteristics of the option contracts; or whether it might be a statement that management was unable to assign a sufficiently low risk factor to growth potential and equity price beyond Y2K to warrant assuming longer term risk. Also from the 1998 report, page 38 (Notes): ... Equity Instruments Indexed to the Company's Common Stock--Proceeds received upon the sale of equity instruments and amounts paid upon the purchase of equity instruments are recorded as a component of stockholders' equity. Subsequent changes in the fair value of the equity instrument contracts are not recognized. If the contracts are ultimately settled in cash, the amount of cash paid or received is recorded as a component of stockholders' equity. ... Comment 3: From Part 2 of your posting, the sentence, "...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...." IF updated for the two stock splits since then, would now read in part, ... at an average exercise price of $9.75 and $2 ...." Oh, and BTW.... for the non-mathematically-challenged, the same process will work to determine the strike pricing of the outstanding calls. (I did not review quarterly data to update the numbers which have been exercised.) DELLish, 3.