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To: hueyone who wrote (43494)	6/14/2001 6:15:26 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 54805

Hi Huey, Yes, options have a materially distorting effect. You mention impact of options on EPS. I don't see it that way, except perhaps as a variety of accounting fictions comparing apples to peaches. EPS comparisons across growth companies is like using a weigh scale to measure height. Both are merely useful approximations, and often grossly inaccurate. The real impact of option exercise is in cash flow, and perhaps that's why SEC likes to ensure a nice detailed disclosure in the statement of cash flows. Fine for me, because I'm from the old school where discounted free cash flow is the only thing that matters. So it becomes easier to compare two companies by just creating a modified free cash flow statement that excludes the effect of stock option exercise. If you want to account for employee benefit of stock option as a compensation expense? Forget about trying to retrofit that one. The necessary data is not disclosed. All that being said, I think we agree when you said "it looks like a company's options program (and its impact on cash flow) is another important issue to wade through when evaluating the fundamental soundness of your company's business model." John.

To: hueyone who wrote (43494)	6/14/2001 6:50:57 PM
From: gdichaz	Read Replies (3) \| Respond to of 54805

Huey: Yes. Options have a distorting effect. And Earnings, however defined, are suspect. But if you think about the fundamentals of the companies themselves, there are actually some clear guide lines. Why worry about the past? What about the future? In brief, if you find a company which is strong within its area, then isn't that a company to look at carefully? And if it seems that company has a very real clamp on the technology which is essential, why not consider it? Isn't investing about winners? If so, is the rear view mirror where to look (at the dust trail) or out through the windshield (at the road ahead)? [Qualcomm is my example, of course] Best. Cha2