Can anyone tell me how much of an impact the new FASB rules on EPS accounting (diluted vs. primary) will have on LSI? Last summer, Barron's ran a piece on this, and mentioned LSI as one of the 10 companies that will be most negatively impacted by the new rule.
If my memory serves me right, I think the potential dilution for LSI's earnings is 13%. And I also remember reading somewhere else that, for Microsoft, the number is as high as 35% and Intel is somewhere in the high teens.
In general, tech companies are going to be most affected by this since they issue a lot of stock options to their employees. For companies such as McDonald's etc., the dilution potential will be of the order of 2 or 3%
At the time I posted a remark about this but was ignored. Now that we can see the effect of this rule change on some companies (ie. IBM), maybe some people will begin to notice.
The Barron's article stated that LSI was one of the biggest dispensers of stock options and this would come back to haunt them in 1998.
My feeling is that as long as the stock prices keep rising, the investors don't care. However, when the tide turns, this will be used to amplify the pessimism, just as there are any number of things that are being used to amplify the optimism that has prevailed until now.
Dipy. |
