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To: Chuzzlewit who wrote (138136)	7/30/1999 2:27:00 PM
From: Richard Forsythe	Read Replies (2) \| Respond to of 176388

Well I agree with your comments about internuts, and that if they paid market rates they go bust. In fact, I agree that we might argue that Amazon's primary source of cash flow is stock sales, not books. This is clearly reflected in their results, however, and investors are not being "gulled". They are arguably being unwise, of course. However, I think that a business must be evaluated according to revenue and profit per share (or operating cash flow, if you must). Stock options raises the per-share bar through dilution (lowers the bar, if you're making losses), and the internuts are clearly using this to generate (non-operational) cash flow and lower the per-share losses. However, I think caveat emptor should apply here. The earnings are correct, but if there is significant dilution causing a reduction in per-share losses, I would steer clear. Also, if a company's fully diluted earnings growth becomes less than another company's (perhaps because the other company does not issue options), then I will switch my investment. But I don't think it would be helpful to show options as an expense on the P&L. Nor do I think that the "costs" of options are anything more than the dilution. There is an implicit opportunity cost (the B/S method calculates the market value), but that's not something accountants should get involved in -- opportunity costs are intrinsic to business. Real costs are reflected in accounts. Richard