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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 73.87-0.1%Jan 9 9:30 AM EST
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To: rkral who wrote (66048)8/24/2004 7:53:24 PM
From: Kirk ©  Read Replies (1) of 77400
 
Excerpt from “Why I don't Own Cisco”
suite101.com

In its latest quarterly report, San-jose, California-based Cisco said it had 6.76 billion shares outstanding as of May 21.

It also said it had 1.365 billion options outstanding as of May 1, with a weighted average exercise price of $25.15 per share, and 396 million options available for grant.


6.76 B shares outstanding 
and
1.365B options outstanding and
0.396B options available to grant 
-=-=-=-=-
1.761B total options for future dilution!
.
So, in the future your EPS could go down when these options vest into new shares.

1.761B / 6.76B x 100% = 26.1%!

So, Cisco’s TTM EPS of $0.706 would be reduced by 26.1% to $0.522 per share!

Unless you are a trader, why would you want to buy a company where your ownership will be diluted by 26.1% if the price goes up enough to cause all the options to vest? Look at it differently, Cisco will have to earn 26% MORE just to overcome options dilution.

BTW, many say Cisco managers are “Crooks” for taking this level of “handouts” from the owners (shareholders) of the company. I think they are wrong. Cisco managers are no different than the beautiful women who require their men to spend lavishly to keep them. The difference I see is once the women age, the playboy men like Hugh Hefner usually turn them in for new, younger models. I don’t know why Cisco owners keep the Cisco management team around when the stock has fallen so far off its highs and there has been a decrease in shareholder equity due to options giveaways. Maybe shareholders ARE looking for “younger managers” and have left for Google?

Kirk
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