Dell Computer Corporation
One Dell Way
Round Rock, Texas 78682
February 18, 2003
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street NW
Washington, D.C. 20549-0609
Re: File No. S7-50-02; Proposed Rule: Rule 10b-18 and Purchases of Certain Equity Securities by the Issuer and Others (the "Proposed Rule")
Dear Mr. Katz:
Dell Computer Corporation ("Dell") appreciates the opportunity to comment on the Commission's proposed changes to Rule 10b-18. Dell has an active share repurchase program, and we are therefore very interested in this Proposed Rule. While we are supportive of several of the recommendations therein, we do have concerns about some of the disclosure/reporting implications as more fully discussed in our specific comments below.
We have the following specific comments on the Proposed Rule:
- We strongly support the proposal to allow qualified issuers to trade up until 10 minutes prior to the market close. We believe that the 10 minute rule strikes an effective balance between the need for flexibility for an issuer and the need to prevent an issuer from affecting the closing price. Our experience is that there is significant trading volume during the final 30 minutes of a trading day. Due to the high trading volume during that time period, we believe it is unlikely that an issuer with significant public float and trading volume would affect the closing price.
- Dell strongly supports the proposal to increase the volume limit to 100% of average daily trading volume in the event of a severe market decline or market-wide trading suspension. We believe this proposal enhances market liquidity and provides additional flexibility to issuers during rare times of market turmoil.
- Dell strongly supports enhanced disclosure regarding an issuer's share repurchase activities. We are concerned, however, that the Proposed Rule may result in confusing disclosures. We believe issuers should be required to announce promptly the adoption of a share repurchase program (although we do not think it necessitates the filing of a Form 8-K) and that Item 703 of Regulation S-K should be amended to require issuers to disclose: (i) the size of their share repurchase program; (ii) the number of shares purchased to date, (iiii) the number of shares purchased during the most recent quarterly period; (iv) the manner in which such purchases were effected; and (v) the average price per share paid during that quarterly period. This information would provide a complete and meaningful description of an issuer's share repurchase program.
Further, we believe that monthly or daily reporting of share repurchase activity, as suggested by the Commission, would not provide meaningful information to investors. Similarly, we do not support the disclosure of specific transactions that exceed a certain threshold as this would provide incomplete and therefore potentially misleading information regarding an issuer's share repurchase activities. Instead, we strongly believe that detailed quarterly disclosure of share repurchase activity in a single location on Forms 10-K and 10-Q, coupled with a public announcement of the adoption of a program, would provide meaningful and relevant information for investors and provide a complete and accurate view of an issuer's repurchase activities.
- The Proposed Rule requires identification of the brokers utilized for a share repurchase program. We believe this information is not meaningful to investors and may create an undue burden on issuers. Further, we do not believe that the identity of the broker or brokers provides any meaningful or material information to investors.
- We are concerned that the Proposed Rule unnecessarily restricts the availability of the Rule 10b-18 safe harbor during a pending merger. The Proposed Rule prohibits any share repurchase activity for an extended period of time during a pending merger, even if the merger is immaterial to an issuer or if the valuation period for the issuer's stock has expired. The basis for this proposal seems to be that an issuer may have an incentive to raise its stock price during a pending merger. This concern, however, is already addressed by Regulation M, pursuant to which an issuer is required to suspend its share repurchase activities during valuation periods and during proxy solicitations. Regulation M, therefore, effectively addresses the Commission's price manipulation concerns. Further, it would seem that these concerns are not relevant in an all-cash merger. Accordingly, we urge the Commission to reevaluate this portion of the Proposed Rule.
Thank you for the opportunity to comment on this important matter. If you have any questions regarding our comments, please contact me at (512) 728-4283.
Robert W. Davis
Vice President, Chief Accounting Officer