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Technology Stocks : FRANKLIN TELECOM (FCM)
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To: Seth L. who wrote (244)4/11/1999 7:44:00 AM
From: William Harvey  Read Replies (1) of 2891
 
Just an aside for #9 on the question of options:

The latest Abelson column in Barron's discusses the ability of companies to keep expenses to a minimum by simply paying their employees in options. I've seen a lot of Buffet quotes on this thread so here is how Warren Buffet poses the questions of options and valuation: "If options aren't a form of compensation, what are they? If compensation isn't an expense, what is it? And, if expenses shouldn't go into the calculation of earnings, where in the world should they go?" You've got to give people credit for wanting to figure out real earnings or losses.

Let me put it this way, I know a stock on the AMEX that does $5M in e-business every quarter and they have a market capitalization probably two thirds what Franklin is (accounting for all options). Oh, it does another $400+M in business per year. At a profit. Now do you think Franklin can justify its options? (A shrew person might ask can Franklin justify its price but I fell on my head as a kid.)

WH
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