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Politics : Ask Michael Burke
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To: Mike M2 who wrote (44506)1/25/1999 9:53:00 PM
From: Richard Nehrboss  Read Replies (3) of 132070
 
Mike, Peter, et al,

After rereading Microsoft's earnings announcement with the revision accounting for ESOs, I'll make a couple of comments.

I stand by me figure of 8% impact on earnings. The method of hedging the options granted by buying calls is sound. On top of this, MS discounts interest income to reflect this. Therefore, I am comfortable with the earnings reflecting this.

Actually, as I write this, something strikes me. The "hedge" would need to be an eternal hedge. If MS were to buy calls to offset, the options granted in the ESO, they would need to continually buy calls until those options were exercised. hmmmmm

I'm no longer as comfortable with the 8% figure. I will query MS Investor Relations to see if I can get more info.

Richard
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