To All, Forbes has a wonderful piece on options replacing compensation by our old friend, well, she probably wouldn't like that old word, Gretchen Morgenson. Smithers & Co. of London calculated 1996 eps for some US companies if stock options had to be expensed. It turns out that Dell's $498 mm in eps would become a $862 mm loss, MSFT $2,825 mm goes to a negative $10 billion, and Cisco's nearly bilion dollars in profit comes up a $656 mm loss.
Some of this is overdone. IMHO, most of those options will expire worthless in the next bear market, costing the co. nothing. And when they hand employees their pink slips, they can say, "thanks, suckers!" <G> Still, it does show how much the eps "growth" in this New Pair of Dimes economy depends upon accounting tricks rather than business growth.
Warren Buffett was quoted as saying that as soon as Berkshire takes over a co., they replace the options scams with cash compensation so the eps accounting will be real.
Good luck, MB |
