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Technology Stocks : CYRIX / NSM

NSM 18.27

0.0%

Jul 31 5:00 PM EST

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To: Joe NYC who wrote (28401)	7/20/1998 4:40:00 AM
From: Craig Freeman	Read Replies (1) of 33344

Jozef, option grants are a license to steal. In an effort to curtail excessive grants, the accounting rules were changed to require companies to calculate per share earnings as though all outstanding options had been exercised. But many companies just instituted "buy back" programs to hide the dilutive effects. For example, over time Intel might report $10B in total earnings, grant stock options worth $10B, and then buy back $10B in open market shares. The net effect is that Intel would have paid its employees every cent while reporting excellent earnings! The market tends to ignore options/buyback activity for a long time but eventually it is fully reflected in the stock price (typically when a company has a bad year and "suddenly" finds itself short of cash). To see how well a company is serving its shareholders, you often need to examine year-over-year changes in book value rather than just reported earnings. Craig

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