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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Mike Buckley who wrote (50519)2/26/2002 3:09:55 PM
From: hueyone  Read Replies (1) of 54805
 
Well then, can I be audacious too? <grin> I interpret Pirah’s trouble with the tax credit for option exercise appearing in the cash flow from operations section as support for my previous contention that it does not belong there and can severely distort investors perception of the company’s performance as well as investors’ free cash flow calculations. It sounds as though Pirah may agree in principal with my previous contention that SEBL did not produce positive free cash flow from operations in years 1999 and years 2000.

With that potentially incorrect paraphrasing of Pirah and the extra dose of audacity out of the way, I will say I agree that this entire options problem is complex with no easy answers on how best to handle it. With regard to JS’s skill testing question, post #50495, I believe the second company will falsely appear to investors to be 7 billion dollars more profitable from operations than the first company, even though the net economic activity was exactly the same. I am not an accountant however, and I could easily be wrong. I would like to hear others' opinions. The impact on many tech companys "earnings" from stock options is not inconsequential and I believe it is important for each investor to devise a consistent way to account for and deal with it.

Best, Huey
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