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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 75.19-0.1%Jan 16 3:59 PM EST
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To: Wyätt Gwyön who wrote (47692)2/1/2001 10:15:15 AM
From: The Phoenix  Read Replies (2) of 77400
 
Mucho,

Yes, I understand the dilution issue and I had assumed that this was the tact John had been taking and what may have been discussed in the Economist. These are valid points however one could say the same thing about salaries too. That paying salaries reduces operating income and therefore impacts earnings and thus valuations. Rather I believe - again - that options are an incentive for employee's to excel and drive the company to execute. For this they get to share in the gains. Imagine you own a race car... and you pay a driver a salary. When he wins the question is do you share the winnings with the driver or do you keep them all for yourself. I suppose you could keep all the winnings but if the driver is really good he may chose to drive for another owner. Further, if you suggest to him you'll share the winnings maybe he drives harder.. practices harder...works with the crew more often... etc.. etc.. to make sure he can win the race.

I think much focus has been put on options as income... but options are worthless unless the company wins. The options are an incentive to execute. If the company doesn't execute and the stock doesn't go up then no one wins... not the stockholders.. not the grant holders... But if the company does "win", then the stockholders win and they share some of the windfall with the employee's - the drivers.

So, there is no free lunch... the employee's have to execute to benefit. I continue to be amazed by the community of peple that seem to believe options are an entitlement. Perhaps the past couple of year has jaded you as much as those that have become millionaires.

OG
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