Qualcomm Incorporated (QCOM) Message Board

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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 155.34

-1.6%

3:02 PM EST

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To: Elroy who wrote (122042)	7/24/2002 11:46:20 AM
From: Stock Farmer	Read Replies (1) of 152472

Most of us use analysts consensus forward earnings projections. Their models include projections of increases in diluted share counts. "Most of us"??? You are flattering the majority of retail investors and a large segment of analysts. So the forward earnings you are using to make your investment decision DO include dilution assumptions. Sure. If counting nights for the next week is the same as planning how many hours of darkness you will see in your lifetime. For folks planning to buy a stock and holding it long term, dilution has the SAME EFFECT as an equivalent reduction in earnings. So you can take your pick. Either entirely factor in dilution (how many shares there will be way out then in the 30-year future being used to calculate some discounted sum of profits... which most people most assuredly do not do), or simply reduce EPS by an amount equivalent to the current rate of dilution and then use the simple PE math without having to factor in dilution rate. Since most people can barely do discount calculations with a calculator, the EPS thing is the easiest comparator. When it comes to publishing diluted shares as "in the money, vested"... you asked: You sure about this? Yes. Go look in the 10-K and read the footnotes. Go look at the table of options outstanding. And look at the difference between number of shares outstanding and fully diluted shares. And compare that to the amount of options disclosed. Have a nice day. In the VC world we use the term "Fully Diluted", which term includes all of the AUTHORIZED options. Not just those granted, but those which the BOD has authorized management to grant!! Read the 10-K and figure out how big this number is. Then let's have a discussion. All issued options should have some affect on diluted share count, and the affect should be dependent on the options strike versus the share price at the time of counting and the stock's volatility. Not the operating expense line. In the end the only thing that matters is the profit of the enterprise, net of whatever shareholders contribute in order to secure this profit. How you account for it is irrelevant. Except that a lot of folks are accounting for a real cost as zero, and pretending that they have been accounting for it as something. Fine by me, it's a free country. But don't ask me to suggest it's a smart thing to do. John

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