How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 476.08

0.0%

Dec 17 3:59 PM EST

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To: johnd who wrote (49375)	9/15/2000 12:24:54 PM
From: johnd	Read Replies (1) of 74651

An interesting cash flow benefit to softy from Mr. Allen's selling. Oops, I am still bearish though, stock to 60. -- Gretchen Morgenson pointed out in a front-page New York Times story on June 13, 2000, companies like Microsoft (NASDAQ: MSFT - Quotes, News, Boards) and Cisco are well "on their way to owing nothing in federal income taxes on the money they have made so far this year." The reason for this involves the way they benefits by using stock options to compensate, retain and attract employees and executives. Unlike wages, the exercise of stock options by employees does not register as an expense on corporate income statements. This is a huge benefit, allowing firms to attract and hold top talent at relatively modest salaries. Rather than paying its employees more cash, companies like Cisco & Microsoft actually draw cash into the corporate treasury from their employees when they exercise these options. The final kicker is the tax benefit that companies receive from the federal government when employees exercise such options. Under IRS rules, companies receive a tax deduction equal to the gain registered by employees. Stock options have become the preferred method because they are a tax-free way to raise compensation without adding to current labor costs.

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