Ole 49r, someday we all will revisit that article.
a very short version follows ....
The fundamental problem is that Microsoft is incurring massive losses
and only by accounting illusions are they able to show a profit.ÿ
Specifically, Microsoft is granting excessive amounts of stock options
that are allowing the company to understate its costs. You might ask
yourself, what would happen to Microsoft's stock price if the public
suddenly realized that they lost $10 billion in 1999 rather than earning
the reported $7.8 billion?ÿ If 80 percent of its stock value or roughly
$400 billion is the result of a pyramid scheme, one might also ask what
kind of effect this could have on the retirement system. It is al
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his situation is not about stock valuation, product quality or whether
or not Microsoft has monopoly power in its markets.ÿ Nor is it part of a
pro or anti-Microsoft movement.ÿ This situation is instead a shining
example of financial fraud and corruption enabled by bad government
policy.ÿ If not quickly and aggressively addressed, we will all be
losers as credibility in our financial markets is destroyed.
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Financial Pyramid Building Techniques Being Used by Microsoft:
Stock option programs are a big benefit and many companies use them
responsibly. At Microsoft, however, stock option accounting is only one
of its many pyramid building techniques, what could be called a cash
generating component. Additional pyramid building techniques include the
following.ÿ It is important to note that the genius of the pyramid
scheme is to leverage share growth from investors using a passive
investment approach based upon indexing to the S&P 500.ÿ Most smaller
and mid size technology firms are not in the S&P 500 and therefore are
locked out of this key aspect of the pyramid from the beginning.
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3)ÿ Why do you call this a pyramid scheme?ÿ I don't see the various
levels?
Microsoft knows that for every dollar they can inflate their stock
price, they will be able to create 35 cents in the form of lower taxes.ÿ
This is because they will be able to take a tax deduction for the $1
increase as stock options are exercised. They have effectively developed
a cash machine, common to all such pyramid schemes.
The top level is Bill Gates and the bottom level are 401K, 403B and
public pension retirement plan participants.ÿ Microsoft employees and
various other levels reside in between.ÿ The share price is being
leveraged higher by an undisclosed debt pyramid which is common to all
such schemes. As Bill Gates and top management aggressively diversify,
employees and the retirement system are being left with inflated
shares.ÿ Imagine the heartache of working 60 hours a week, thinking you
are part of this great technology company, only to realize that you are
part of a scheme robbing the retirement system.ÿ For this reason alone
you would think that the anti-Microsoft movement could show a little
compassion toward the Microsoft employees.ÿ As you know, most aren't
happy.ÿ They know something is wrong given the enormous demands put upon
them.ÿ Financial pyramids are very hard to sustain once the base becomes
too wide.ÿ In plain terms, there are now more than 5 billion shares
outstanding.
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15) How would you handle a stock option program? By giving options liberally to everyone down to the gardener and keep giving them until the company started creating consistent earnings. At that point it is important to target key employees and project groups and reward them with options and pay and others with cash wages and the ability to purchase stock at discounted prices. As companies exceed $10 billion in market capitalization, they should realize the importance of shifting more to cash wages in order to protect the integrity of the financial structure. |
