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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Leader who wrote (64878)	7/19/1999 7:22:00 PM
From: Knighty Tin	Respond to of 132070

Jeff, I thought the same thing. The last quote is 51 in the real market. My guess is that somebody slick found a way to mark his portfolio higher with a 100 share sacrifice. Dumb!

To: Jeff Leader who wrote (64878)	7/20/1999 1:51:00 AM
From: umbro	Read Replies (2) \| Respond to of 132070

Mike, a question/two on MSFT's accounting for ESOP's: In today's WSJ: interactive.wsj.com Recently, Microsoft's pockets have also bulged because it is falling behind in its never-ending effort to keep up with stock options exercised by employees. As of March 31, the market value of Microsoft's stock options outstanding was $72 billion. Microsoft buys back shares on the open market to give to employees exercising stock options. To pay for the shares, Microsoft uses the cash it receives from employees, who must cover the original issuing, or "strike," price of the options. Microsoft also gets a tax benefit for the difference between the strike price and the market price. In addition, Microsoft has a warrant program that helps finance its stock repurchases. The financing program added $2.55 billion to the cash total in the first nine months of the year, a sharp reversal from the $501 million the efforts cost Microsoft as recently as fiscal 1997. And, this is from the Q1 1999 Microsoft 10-Q, "Management's discussion": Cash will also be used to repurchase common stock to provide shares for employee stock option and purchase plans. The buyback program has not kept pace with employee stock option grants or exercises. Beginning in fiscal 1990, Microsoft has repurchased 691 million common shares while 1.76 billion shares were issued under the Company's employee stock option and purchase plans. The market value of all outstanding stock options was $72 billion as of March 31, 1999. Microsoft enhances its repurchase program by selling put warrants. During December 1996, Microsoft issued 12.5 million shares of 2.75% convertible preferred stock. Net proceeds of $980 million were used to repurchase common shares. What is the "tax benefit" mentioned above? Is there an actual expense, amounting to the current market price minus the strike price that has to be paid at some point in time? Also with 72B outstanding isn't it reasonable to assume that the one half or more of that amount would be the amount that the current price is above the strike? At 36B or so in market value to be bought in, it doesn't seem that the 2.55B will go a very long way. And, isn't it odd to be floating stock (admittedly at a higher basis), in convertible preferred, to fund the repurchase of stock?