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Technology Stocks : How high will Microsoft fly?
MSFT 459.86+0.7%Jan 16 9:30 AM EST
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To: David Howe who wrote (72155)8/15/2002 12:40:25 PM
From: John F. Dowd  Read Replies (1) of 74651
 
DH: Everyone makes the comment about dilution with respect to market. Where does market value appear on the balance sheet? There are a lot of issues at play here. A lot of people look at options as if the grantee is 1. not paying in anything and 2, if he were to flip the shares that some one would not buy them at the market and 3. the company is not buying and retiring shares or making treasury shares of them. This whole debate has really been a lot of cocktail party talk to date. If the cash coming into the treasury is above book and if the company buys back the offsetting amount then the cost to the company at the time of exercise is the difference between say the avg. cost to buy back and the amount received from the grantees. Now as long as the share price paid is greater than book there is no dilution to book but there is dilution via shares outstanding and thus to EPS except and unless an equal amount of shares are purchased by the company. On the other hand to me the best measurement of a company, especially one with no debt, is the speed with which they are building cash. But we never know the impact on this until the time of exercise. It is this cash cost that is the real cost, the rest is baloney. JFD
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