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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 78.07+0.1%9:39 AM EST
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To: RetiredNow who wrote (65470)5/13/2004 3:06:52 PM
From: Lizzie Tudor  Read Replies (2) of 77400
 
yes you are correct, I wasn't thinking about the paid in cash from options exercising as an equation in the cash flow picture which of course it is.

However, the overall point remains- companies like Juniper who really don't have large paid in cash from options (most of their options have strike prices of $1 or less and all others are underwater)- continue to have cash flow of say 100mm per quarter and earnings of maybe 1/3 that. There is a very valid reason for this of course, the networking infrastructure companies especially are very conservative in revenue recognition so as to avoid the Sonus situation of constantly having to "return" installed equipment against future quarters. But still, at some point when every stock you own has about double the cash flow vs. earnings, and as Warren Buffett says corp taxes are at a 70 year low while RATES are not, it just stands to reason that earnings are manipulated. We all know they are, and thats fine but here comes options expensing to add more discrepancy to the mix.

What I would really like to see is for somebody to take a stock like say Juniper or Red Hat, and calculate the black scholes options expense EVERY QUARTER since their inception, and then hold that up againt the *actual* option expense that occured at exercise. My guess- a HUGE discrepancy, to the high side for the BS approach.
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