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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.96

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To: Lizzie Tudor who wrote (63381)	3/17/2003 6:53:21 PM
From: rkral	Read Replies (1) of 77400

OT ... Lizzie, re "I am wondering how startups can IPO with options expensing as it is currently being proposed. Assuming a startup has to show profitability for 2 quarters (the old rule) I mean." I assume by profitability you mean a net income greater than zero. Options would be expensed before vesting. The expensing would reduce net income. If positive net income is and remains the only measure of suitability for an IPO, the IPO would be delayed until net income becomes positive. But I don't think that extreme will happen. The financial condition of the startup is not changed one red cent when it begins expensing options. Only net income and financial metrics based on net income are changed. Other measures such as (1) assets, (2)total cash flow provided by operating, financing, and investing activities, and (3) stockholders' equity remain changed. Financial people could expand the list, I'm sure. So my guess is that underwriters will be able to change the "rule" and sell the IPO at nearly the same development stage of the startup. Well, the IPO may be delayed a little, but that's not all bad IMHO. Regards, Ron

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