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Technology Stocks : COMS/USRX
COMS 0.00130-87.0%Nov 7 9:30 AM EST
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To: Price Monger who wrote (1051)3/21/1997 4:45:00 PM
From: kech   of 1384
 
Price - Just because you would tank the stock to get lower options if you were CEO don't attribute this behavior to Benhamou unless you can back it up. When are options awarded? Is there some timely relationship between "spending on R&D" causing "stock to tank" followed soon thereafter by "options awarded". I doubt the first link because I don't think analysts are that easily fooled -- many are primarily interested in Gross Margin and some (California Stock Letter) add back R&D to earnings and don't even consider it an expense. Certainly, most of the questions in the conference call were concerned with margins - no one talked about R&D expense. I also doubt the second link although I don't really know the timing of options awards. They should be spread out through the year to avoid the possibility of this type of gaming. Further, Benhamou had $33 million in 3COM stock last time I checked. Does it make sense to drop the value to $15 million so he can pick up $500,000 in 3COM stock at a cheaper price? I wouldn't do it- maybe some would. Finally, the whole deal of throwing USRX and the conversion price in is totally off base. If he gets to buy options for 100,000 shares whether he tanks 3com or 3com/usrx he still gets 100,000 shares of 3com at a lower exercised price. The usrx part doesn't make any difference to his incentives to do it.
Sorry you lost money, so did I, but I figure that the issue is competition in both networking and modems (if you have USRX) and we underestimated it. Big mistake.
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