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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: JC Jaros who wrote (44612)	5/9/2000 5:17:00 PM
From: Rusty Johnson	Respond to of 74651

When These Geeks Talk, Microsoft Listens By Allan Sloan What's the only power on earth that seems capable of bending Microsoft to its will? washingtonpost.com Give up? It's the accounting geeks at the Financial Accounting Standards Board. Microsoft recently gave away about $1.4 billion of value to its employees to stay on the right side of an FASB rule that would otherwise have devastated Microsoft's reported earnings. ... This screwy situation that caused Microsoft to issue a whole new set of options is a fallout from the battle five years ago when tech companies succeeded in blocking rules that would have counted options as an expense at the time that they're awarded. For arcane reasons, FASB rules now require options that are repriced to be charged against profits, but they don't require fixed-price options to be charged. Having to charge the April options against profits could easily cost Microsoft $30 billion of pretax earnings over the options' seven-year life. That would gut Microsoft's reported profit and probably whack its stock price, which is heavily dependent on its earnings prospects. ... Microsoft wouldn't say whether accounting considerations played a role in its decision to issue new options rather than reprice the old ones. Clearly, they did. Either Microsoft bestowed $1.4 billion of extra value on its employees because it felt especially benevolent, or it did so to avoid screwing up its reported profits. I'll pick profits. As does watchdog Patrick McGurn of Institutional Shareholder Services. "They're doing the economically rational thing," he says.