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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (4441)	4/12/1999 8:31:00 AM
From: Sun Tzu	Respond to of 15132

There is no chance of that whatsoever. I happen to work on Wall St and know the details and reasons why many companies indulge in equity derivatives. It is primarily to control the dilution from employee equity options. Compaq is getting hurt more by this news than Dell. Sun Tzu

To: Justa Werkenstiff who wrote (4441)	4/12/1999 10:05:00 AM
From: Ian@SI	Read Replies (2) \| Respond to of 15132

Justa, And I thought that I was cynical! ;-) Dell tends to have an ongoing share buyback program. i.e. - it throws off so much free cash flow that the best way to pay a dividend to shareholders is through the buybacks. A financially astute way to acquire the shares is to sell PUTs for some portion or all of the shares that one wishes to acquire. If the market falls, DELL gets to buy the shares at the STRIKE less the premium. They also have been reported to buy some calls. I don't personally know this to be the case. But it would have the same effect of locking in the buyback price at the strike plus the premium. When the stock goes above that net price, then Dell is able to sell the calls for a profit. Premium gains have added about $3.1B to Dell's balance sheet according to Forbes. (Forbes got it wrong re operating earnings which are completely unaffected by PUT and CALL activity). There was a good discussion of this by Chuzzlewitt on the Dell thread recently. RE CPQ: I suspect that 5fer bit off more than he can comfortably chew with Tandem then DEC at the same time that CPQ is having difficulty adopting the highly successful direct model for both business and consumers. Thus much of CPQ's difficulties are specific to CPQ itself. And I do doubt that 5fer would try to manipulate Dell option prices. There's really nothing for him or CPQ to gain. And he does have much larger problems to devote his attention to. FWIW, Ian.