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Technology Stocks : Wind River going up, up, up!
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To: J. Kerner who wrote (3342)6/24/1998 8:13:00 PM
From: Pirah Naman   of 10309
 
Jason:

>My impression is the calculations are not as damaging as the FAS 123 shows

Until actual costs are known, we should not be assuming that.

> the effect once the options are exercised would be a dilution of stock

Not good for current owners.

> minus any buyback

A cost for current owners.

> if the stock price increases dramatically

Then so will the eventual cost to the owners. Therefore the Pro Forma effect should be greater.

> you cannot compare the FAS 123 between a company
whose stock has risen with a company whose stock has dropped

Sure you can. One has a higher employee cost than does the other.

This "FAS 123 Pro Forma" is another accounting fiction (just like not including this compensation cost in the income statement) but it is the only mechanism we currently have to estimate a real economic cost.

> if another company's employees have exercised all their options then their options will not show up as part of the FAS 123

Then we will see either a dilution, or a reduction in cash (perhaps an increase in debt).

Forget comparing one company to another. The "problem" is that there is a very real economic cost to owners that in this case has the potetnial to be quite significant.

If anybody would like to read a very basic description of how this works (the cost, not the accounting rule) then go see:

members.aol.com

Go to the Market View and read March 13, 1998.

Pirah
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