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

To: GVTucker who wrote (41301)	10/23/2000 12:10:49 PM
From: Eric	Respond to of 77400

GV Very good reasoning. This seems to make sense and the way I thought it worked. It's interesting how many of the tech's use this technique for employee incentives and compensation. Eric

To: GVTucker who wrote (41301)	10/23/2000 12:15:02 PM
From: The Phoenix	Read Replies (2) \| Respond to of 77400

I'm missing something. If the 'cost' is higher isn't the exposure lower since the gain is lower and it's the gain that the taxes are paid against. Right? I'm not an expert on this particular matter but I thought the issue was tax benefits due to option exercises... correct? Specifically if an employee exercises an option at $55 and the cost basis is $55 then there is no gain and therefore no tax... and then no tax benefit to CSCO correct?

To: GVTucker who wrote (41301)	10/23/2000 12:16:13 PM
From: bambs	Read Replies (1) \| Respond to of 77400

Agreed. With almost a billion options out there that puts a collar on the stock price. I think that's the worry here. I think that when the article was written the stock was around $70. Bill P. said that the current option liability was around 40 Billion. This year they only had operating income of 3.2 billion And total income before taxes was only 4.3 billion. If the stock ends the year at $70 and you want only a 10% return next year that's 7 bucks. The option expense of the stock going to from 70 to 77 would be in around 6.5 billion. To make up for this expense the earnings would have to increase from 4.3 billion by 50% just to break even. That's only a 10% increase in the price of the stock. This problem isn't going away. It's a collar on the stock. I can't believe the longs of this board don't see this as a major concern for long term investors.