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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.04

-0.3%

Nov 26 3:59 PM EST

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To: Adam Nash who wrote (47560)	1/30/2001 5:26:01 PM
From: Wyätt Gwyön	Read Replies (1) of 77400

I believe if options have any real value, it should be as an incentive. But there should be a greater recognition in the investment community that they are a form of compensation. In terms of value as a tax shield, or other financial machinations, I don't think these flows deserve a premium multiple. They look like extraordinary gains to me--strengthening a company's balance sheet, but not a predictable annuity. If anything, from the perspective of one trying to discount future "real" operating cash flows, the options morass is just a big confusing mess. Makes it harder to assess the real earning power of an enterprise, both because expenses are skewed, and the share count is skewed. Confusion deserves a lower multiple in my book. To paraphrase Buffett, if options aren't a form of compensation, what are they? And if compensation isn't an expense, what is it? And if an expense shouldn't count against discounted present value, where should it go?

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