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Technology Stocks : 3DFX -- Ignore unavailable to you. Want to Upgrade?

To: Peter S. who wrote (13308)	6/16/1999 8:41:00 AM
From: Michael G. Potter	Read Replies (2) \| Respond to of 16960

This probably will be greeted as good news. I treat these type of announcements as a reflection of the real cost of stock option plans. They need to buy back all those shares otherwise they will get substantial dilution. 3dfx (like many tech companies) offer a fair number to a large number of options to their employees as part of their standard compensation. That leads to dilution and to constant insider selling announcements. Plus there's option repricing if the stock goes down because options are being used to pay employees and the stock market can debase the currency. I was just looking at houses in the San Jose area last week, so I now have a much better understanding of why insiders need to cash in their options, especially if salaries are lower because options are considered a base part of their salaries. I recently saw a few news articles where Microsoft was raising salaries to employees because their stock wasn't appreciating at the rate it used to. I wonder what will happen to the net income of tech companies when they are not in a bull market where they can use options to hide the real cost of their labour? Michael

To: Peter S. who wrote (13308)	6/16/1999 8:44:00 AM
From: Sun Tzu	Respond to of 16960

In other words, we have issued a ton of options that are now in the money and since like many companies we are paying our employees in stocks without recording that cost on our balance sheet, we need to buy back the shares. At current levels, that would be about $30 mil. How are they going to finance it? Or do they expect it to drop much further? BTW, I am all in favor of companies being allowed to buy back the shares so that they can take advantage of market gyrations. It is the employee option plans that I am not happy about. ST