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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 77.80-0.5%Dec 29 3:59 PM EST
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To: kvkkc1 who wrote (44690)12/17/2000 5:47:38 PM
From: Stock Farmer  Read Replies (1) of 77400
 
k... careful leaping to incorrect conclusion. CSCO shares could plummet to $12 and more than half of outstanding options would still be in the money.

I published this earlier. It's important to note because very few people understand how fundamentally important the option elements are to CSCO's business.

You may be right in some respects however. In scenarios advanced by the more doom-and-gloom oriented, it is quite possible that some options will be forfeit by employees who get tired waiting for them to be "in the money" and quit.

But the effect is negligible if you check the facts. Only 5% of the options granted & outstanding as of FY2000 close are underwater. Half a billion or so have strikes under $13. A further quarter of a billion probably have strikes under $30, and so on.

Finally, although impossible to get exact figures, when a private company is embraced into the collective, substitute options are issued. Assuming these substitutes are designed to preserve economic benefit to the holders, likely very low dollars. Majority of options added to the pile appear to be substitute options (this is very hard to figure out without reading through all the SEC filings on takeover).

Similarly, majority of dilution is through purchase (not just options).

John.
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