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Technology Stocks : Intel Corporation (INTC)
INTC 35.53-1.1%Nov 14 9:30 AM EST
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To: Michael Bakunin who wrote (97219)1/23/2000 5:22:00 AM
From: JDN  Read Replies (1) of 186894
 
Dear Michael: I am a retired CPA and have been retired for 9 years now. However, this options arguement was going on even then. Here is the problem IMHO. Accounting measures HISTORICAL costs not future costs. Options are typically granted at the current fair market value of the stock, thus at that time they are valueless or you might say costless. You might argue that ok, but if they appreciate ie stock price goes above the option price then they do have value. That is true but there was not "cost" to the corporation. The "cost" comes in diluting the stock of all shareholders. And, that is so recognized, remember you have "Primary" earnings per share (that is basically current weighted average shares outstanding divided into earnings) and "Fully Diluted" earnings per share (that is the above plus "common stock equivalents" which are potential shares which may be issued). On top of that you also have full disclosure required in the footnotes (which are as basic to the financials as the balance sheet IMHO) of all options. So this answers Mr. Buffet's comments also.
Now, that all being said, it has long been my opinion the the Tech industry does tend to abuse stock options. I think it all started years ago when Techs had little cash flow to fund current salaries and had to offer something to attract good executives. Now I look at their salaries and wonder why they also need such lucrative stock option plans to boot. However, at least in the better tech stocks they go into the market and buy shares to help fund their plans. JDN
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