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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.11

+0.9%

Nov 21 9:30 AM EST

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To: Elroy who wrote (67244)	3/8/2005 12:05:21 PM
From: Stock Farmer	Read Replies (2) of 77400

Hi Elroy, "companies like CSCO should be required to purchase all of their employee compensation options in the open market and then the "expense" would be crystal clear...",/i> As much as that would be a 'good idea' from an assurance of financial accountability perspective, it's probably a bad idea for us shareholders. The reason is that it is a more expensive way of accomplishing the same thing - the market will demand its share of profit for standing in the trade. We get the same effect if we require Cisco to report what it would have paid on the open market if it had to acquire the options. And the market will use the most efficient and most accurate method it knows to set the price. Which, for better or worse happens to be Black-Scholes or a derivative. Since the market will use Black-Scholes (plus spread for profit) to set the price, we cut out the middle man and the middle man's profits if we just require the company to report their profits AS IF they had spent the cash. Presto.

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