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Technology Stocks : MSFT Internet Explorer vs. NSCP Navigator

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To: 16yearcycle who wrote (15831)1/6/1998 12:28:00 PM
From: Reginald Middleton  Read Replies (2) of 24154
 
The following is a tid bit that I am putting on my site to show the power of incentivizing employees with the use of properly structured stock option programs (assuming your stock is stable). This is not to knock NSCP, for I think they are the best software company to come around for some time, but to point out exactly how powerful MSFT's compensation program is in the scheme of things.

NSCP
Annual Volatility = 78.14%
Volatility for Last Month = 126.5%
Valuation table (descending order) for employee stock options of NSCP Corporation
Stock option
$7.43 $0.0163
$9.28 $0.0436
$11.14 $0.0926
$12.99 $0.1689
$14.85 $0.2771
$16.71 $0.4206
$18.56 $0.6017
$20.42 $0.8220
$22.28 $1.0822
$24.13 $1.3826
$25.99 $1.7227
$27.84 $2.1020
$29.70 $2.5196
$31.56 $2.9744

MSFT
Annual Volatility = 33.54%
Volatility for Last Month = 39.54%
Valuation table (descending order) for employee stock options of MSFT Corporation

Stock option
$52.15 $0.5605
$65.19 $2.3751
$78.23 $6.1325
$91.26 $11.8582
$104.30 $19.1646
$117.34 $27.5696
$130.38 $36.6707
$143.41 $46.1876
$156.45 $55.9433
$169.49 $65.8331
$182.53 $75.7970
$195.56 $85.8014
$208.60 $95.8281
$221.64 $105.8669

As of today, a MSFT employee who recieved 1000 3 yr. stock options one year ago issued at the money would be worth $420,830 as compared to options that are practically worthless for the NSCP employee. The options would be worth $60,000 except for the fact that they are incentivized to exercise the structured options in lieu of selling them outright.

From an empirical and financial point of view, there is significant incentive given to MSFT employees contrary to what the media would have many believe. The models that run these calculations are freely available for download at rcmfinancial.com
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