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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 73.94-1.1%Jan 8 3:59 PM EST
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To: Paul Reuben who wrote (41372)10/23/2000 8:30:14 PM
From: bambs   of 77400
 
Keep in mind that Cisco's margins have become increasingly inflated due to the enormous option grants the company makes to compensate employees, the cost of which doesn't appear on the income statement. If it were, according to estimates in Cisco's 10-K, net income last year would have been 41.9% lower than reported. Two years ago, net income would have been 26.5% lower; three years ago, 19.3% lower. The problem is rapidly getting worse. This reminds me of three questions Warren Buffett asked in his 1998 annual letter to shareholders: "If options aren't a form of compensation, what are they? If compensation isn't an expense, what is it? And, if expenses shouldn't go into the calculation of earnings, where in the world should they go?"

I think this is makes a good point.
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