<<<<fact 1 through 6, MSFT has over 850 million ESO's outstanding, and adding about 200 million ESO's per year ontop of that..... this Diluting effect is not at all close to figured into the earnings, and that is why MSFT produces two sets of earnings numbers.... why do you even make a statement like that when you can easily look up how many ESO's are included in the diluted sharecount.... which is 161 million on their last earnings report, yet as you point out, 533 million ESO's are in the money..... >>>>
If you read MSFT's Form 10-K they describe in their Earnings per share footnote how EPS is calculated. They mention the Treasury Stock method. This method generally measures option shares that are in the money. Currently lets say that is approximately 533 million shares. To avoid dilution for all 533 million shares, MSFT calculates how much money is collectable from the employees when they exercise the options. Currently, they would collect $16.2 billion. Using projected receipts of $16.2 billion from employees, they calculate that the amount would provide the funds to purchase approximately 290 million shares at current market price of $55.93 per share. In addition to the employee funds received, MSFT also converts the tax savings from the credit allowed. The employees taxable gain would be approx $13.6 billion. Using a 33% tax rate, MSFT claims a $4.5 billion credit. That credit provides funds to purchase 80 million shares at $55.93 per share.
So, if 533 million shares are in the money, MSFT receives funding to purchase 290 million shares from its employees, another 80 million shares are funded from the tax credit, leaving 163 million shares that require new issuance of stock and/or unreimbursed shares to be bought back. I think that is close enough to your 161 million number even thought the 12/31/01 actual numbers are not disclosed.
That basically determines the diluted numbers reported in earnings releases. Another factor is that the shares used in eps calculation are a weighted average for the year.
<<<<question 1. ask yourself why MSFT produces two sets of earnings reports with different ESO calcs, if the first set has these ESO effects included???....>>>>
MSFT follows Accounting Principles Board Opinion 25 to account for stock options plans. AN ALTERNATIVE method of accounting for stock options is SFAS 123. MSFT discloses on an informative basis SFAS 123. Both should be reviewed when making an investment.
<<<<question 2. ask yourself why MSFT is against the reforms before congress to include ALL the dilution of ESO's if they already are included?>>>>
What tech company isn't against those reforms.
<<<<question 3. ask yourself why MSFT has spent millions lobbying congress to not include the dilution of ESO's if the dilution is already figured in?>>>>
What proof do you have that MSFT has spent millions lobbying congress on this issue?
<<<<question 4. ask yourself why you say there is approximately 533 million ESOs in the money yet MSFT only reports 161 million or so ESOs in the dilution calculation?>>>>
Explained above.
I can add, I am not a moron, I am not math challenged, and I am not a liar. Unfortunately, you cannot claim the same about yourself. |
