Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (41128)	10/19/2000 3:56:18 PM
From: The Phoenix	Read Replies (1) \| Respond to of 77400

Mindmeld, Actually Parish is more wrong than wrong. I remember his analysis (I'm actually shocked to hear he actually got press from reputable firms like the WSJ). Parish didn't even caluculate the correct number of shares for his analysis rendering the entire thing moot. As for this issue of stock options; it seems strange that anyone could make such a big deal out of a company following GAAP rules. As you point out the government gets its tax money so this does seem like a non-issue. Does Cisco have an unfair advantage? Not really - any company could reward their employee's with options. However, clearly engineers are drawn to CSCO due to the wealth (via options) it creates. So, CSCO's success is due to .... well.... CSCO's success. Options are worthless really - unless the valuation on the market goes up. And CSCO hires great engineers and uses funds to buy great companies to create more value for shareholders and employee's and the benefit is CSCO pays little or no tax. The bottom line is that this is all legal and disclosed. I know many bears like to make a big deal out of "cooking the books" but CSCO follows GAAP and discloses more information than probably any company on the NAZ... which is one reason so many money managers like to hold CSCO... there are few surprises. All this set aside however Parish's piece was flawed in so many ways. Heck - he even called JDSU a competitor. JDSU, as you know, makes ZERO, none, nada, system level products. They are a passive/active opto-electronic company. Parish's piece, as I have said before, wasn't worth reading and should not have recieved print in any publication. I think Portland editors are pretty sharp that they have stayed away from it. not only did Parish do a shoddy job but it sounds like he's got a fat head to boot. Bottom line - pieces like this just fuel sentiment for those that can't do their own DD. Bears eat this stuff up.

To: RetiredNow who wrote (41128)	10/20/2000 5:11:15 AM
From: Amy J	Read Replies (2) \| Respond to of 77400

OT Mindmeld, here's the total employment tax bill per employee for wages earned: Payroll Tax - Employee pays: Soc Sec 6.2% Medicare 1.45% Federal* (% is dependent upon employee's income level) State* (% is dependent upon employee's income level) DBL .7% Payroll Tax - Employer pays: Soc Sec 6.2% (both Employee and Employer pay this) Medicare 1.45% (both Employee and Employer pay this) FUTA .8% SUI 3.4% =================== Total: 20.2% in employment taxes, but this excludes State & Fed. This (20.2%) is before State & Federal are taken out, so it gets even worse: Total tax received (T) = Employment Tax (20.2%) + State & Federal* T = 20.2% + E, (where E = State & Federal) Question: if an employee gains $X in stock options, how much Employment Tax does the government receive? Answer: 0. Question: Okay, but does the government make up for this loss in 20.2% through other ways, like increased State & Fed tax? i.e. Does T = 20.2% + E = S? (we know T = 20.2% + E, but does T= S, where S is the Total taxes paid on stock options) If True, then the government is indeed getting all of their taxes (and you are correct). If False, then the government is not receiving all of their taxes (then the other fella is correct) So, it appears the answer boils down to the following question: Is E = S? ===> i.e. are the federal & state taxes paid on stock options for $X gained (this is "S"), the same as what an employee pays on state & federal for $X earned through wages (this is "E")? If yes (i.e. E = S), then this would mean the government is not receiving all the taxes (20.2%) they would have received if this was earned as wages, instead of options. I don't know Cisco's stock options well enough to know what type of options they have and I don't know if T=S (although I rather doubt it, because it appears to neglect 20.2%), so, I wouldn't be able to determine which of you two folks are correct. However, I know that mathematically, if the state & federal* taxes are identical for both: ($X earned by wages) - and - (for $X earned through stock options): then this means Employment Taxes (20.2%) have not been indirectly or directly paid. However, stock options fuel growth. Regards, Amy J