Richard, you are making a very subtle (and easy to make) mistake: you have forgotten to account for shares repurchased as a dividend. They work in virtually the same ways. For example, a company with earnings of $100MM but paying a $10 MM dividend gets to add only $90MM to retained earnings. In the case of $10MM of share repurchases you would find that treasury stock decreases by $10MM. So, the short answer is that equity increased by the amount of the total exercised price of the shares issued and decreased by the amount of cash used to repurchase common. Also, rather than listing put options as a liability (which would be the case if they were income statement items), they are also included in the equity section, but I don't believe they are marked to market, which means that equity is understated. I believe, although I might be incorrect on this, that only if the put is actually exercised or the options expire is there an adjustment to the equity section.
All of this means that it is very difficult, if not impossible, to calculate what the actual cost of labor is. But you are correct in your concern, and this has been an ongoing irritant to me, not only for Dell, but for virtually every tech company. The more transparent the accounting system becomes, the more upset investors will become at this underhanded practice, and the less apt companies will be to pull this game.
Hope this brief discussion helps.
TTFN,
CTC |
