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

To: Michael Bakunin who wrote (76441)	2/23/2000 1:21:00 PM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Mike, I think the salient point is that a substantial portion of Microsoft's financial performance is derived from financial and accounting practices which have a diminishing positive impact as the stock price appreciates inevitably leading to tough love -g- ho ho ho Mike.

To: Michael Bakunin who wrote (76441)	2/23/2000 1:27:00 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 132070

mb - As usual, we have substantial agreement on most things, but fundamentally different POVs on a few. This seems to be the same conflict as to whether ABX (Barrick Gold) is risking the stability of the known universe when it sells part of its production forward. If it has proven reserves, my POV is that it is effectively selling a covered call. This often has horrendous results in pure hindsight, and is generally equivalent to selling a cash-secured put, but is still basically conservative. When MSFT makes an option grant, the shares to satisfy that grant have already been authorized, but did not affect share count before the grant. (I am of the opinion that all grants should immediately cause full dilution until they are voided). If MSFT does not commit itself to buy back the shares after exercise, I cannot see a debt. At the time of exercise, shares sold into the market are definitely a dilution. The issue that I see seems to be that the only people negatively impacted by that are the current shareholders. A non-owner evaluating the company for investment, or for acquisition as a public company, or for taking the company private, do not have this negative impact. For all cases, owner and non-owner, there are real benefits that have induced the option grant in the first place. As for a buyback, the current shareholder might gain or lose, depending on price and all the other pluses and minuses. The non-owner will always reduce his valuation in response to a buyback as it expends cash to (possibly)benefit current shareholders. Your responses always refer to accounting rules and philosophies which generally just fly over my head. My belief is that a company could be bought or sold in theory without any accounting at all. The buyer, the seller, or both will eventually be seen to have gained by the transaction even if accounting had never been invented. The company is real. It will return a real net cash flow return on net invested capital, even if unmeasured, although it may be positive or negative in actuality. Regards, Don