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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 77.95+0.3%Dec 5 3:59 PM EST
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To: rkral who wrote (59559)6/7/2002 4:10:29 PM
From: rkral  Read Replies (2) of 77400
 
Ms. Morgenson of Bear Stearns would seem to be giving after-tax option expenses here ...

I have learned A LOT since that post. For MSFT in FY2001:

The $3.3 billion option expense (a before-tax number) is the value of option grants using the "fair value method" of FASB SFAS 123.

The $2.1 billion tax benefit (an after-tax number) is the tax credit MSFT received due to the exercise of stock options. This is calculated by multiplying the gross option-exercise income of employees by the effective tax rate.

For CSCO FY2001:
Option expense was $1.7 billion (author said $2.6 billion).
Tax credit was $1.4 billion.

Above numbers verified in, or obtained from, FY2001 10-Ks and annual reports.

Now for the effects of those numbers.
(1) As shareholders, our share of future earnings has been reduced .. but everybody knows about that,
(2) As shareholders, CSCO's earnings have been over-stated because the option grant expenses were not actually claimed as expenses .. some people know about that, and
(3) As general taxpayers we, in the aggregate, are paying $1.4 billion of extra taxes to cover the CSCO's tax credit .. and very few people know about that, I suspect.

Does our gain from (2) exceed our losses from (1) and (3)?
I don't know yet.

Ron
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