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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.85

+1.0%

Dec 2 3:59 PM EST

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To: Lazarus_Long who wrote (67256)	3/10/2005 9:02:45 AM
From: rkral	Read Replies (4) of 77400

Lazarus_Long, re "There are terms in that equation which are guesswoek at best and allow management a great deal of wiggle room." Judging by fair values of options for fiscal 2004 and 2005 YTD, I think Cisco's wiggling has already begun. For 2004, the fair value of 195MM options with a (weighted-average) exercise of $20.00 was estimated to be $8.77. For 2005 YTD, the fair value of 174MM options with a $19.34 exercise is only $6.19. How did the fair value (read expense per option share) decrease 29.4% even though the exercise decreased only 3.3%? It's primarily due to the decrease in estimated (weighted average) option life from 5.6 years to 3.3 years. IMO this change was mainly driven by Cisco's expectation that mandatory option expensing might really happen. Ron

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