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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Stock Farmer who wrote (50786)3/26/2002 10:53:59 AM
From: hueyone  Read Replies (1) of 54805
 
Let's take Siebel. In the three years 2001, 2000 and 1999 Siebel's income statement shows a very respectable net earnings of 374,214 M$.

And deeper inside we see the cumulative employee stock option tax benefit over this period of 260,809 M$. Assuming a 35% effective tax rate, that's a not-visibly-recorded-anywhere benefit to employees of 745,168 M$, or within rounding error of twice what the company earned to the shareholders in this time.

This looks like a decent way for an investor to make a quick, rough estimate of what the impact of expensing stock options would be on a company's earnings John. Thanks for the analysis. If accounting reform for stock options is passed, I would guess Siebel has a chance of becoming one of the poster boy examples for abusive ESOPs in Silicon Valley which were used to falsely (but legally) prop up earnings and stock prices.

Best, Huey
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