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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Seeker of Truth who wrote (43790)	6/22/2001 1:05:36 AM
From: hueyone	Read Replies (1) \| Respond to of 54805

Hello Maclolm, Thanks for your comments. I look forward to studying your post. If SEBL can't reward its employees with stock options that are worth anything then neither can the other IT companies so where can these bright people go? I am aware of the argument that the bright employees may have no place else to go having made the same argument myself on the Cisco thread.<gg> However, I do have some very limited anecdotal evidence from a few people that I know who work in the tech industry that some employees are demanding more cash and less options and are getting it. Do you think there is any possibility that a trend to more cash based compensation is beginning? You are in the tech industry and I am not; I really have no reliable clues or data. My broader point of the example, however, was that the 50% of operating cash flows for fiscal 2000 that the tech industry got overall from stock options exercise tax benefits, may be mostly missing for fiscal 2001 and that this could create a major hit on many tech companies cash flows before the year is out. Usually I like to compare the P/E with that of money but you indicate that E is zero Although my last post looked at entire cash flow and subtracted stock option impact to arrive at a negative overall cash flow for the purposes of giving a rather dramatic example of the potential contribution of options exercise to overall cash flow, I generally prefer to narrow the study to adjusted free cash flow as I did in my earlier post on SEBL. Again, free cash flow is intended to be a proxy for owner earnings from operations. My adjusted free cash flow per share number was small, but positive for SEBL for both for fiscal 2000 and the first quarter. After Ardethan alerted me to my first quarter error, I found that the adjusted free cash flow number for SEBL for the first quarter did not look so bad and mentioned that I was withdrawing my suggestion that SEBL was horribly overvalued until further study---which I still haven't done. Anyway, I would rather stand behind my positive adjusted fcf numbers for a positive E for valuation purposes of SEBL than the negative overall cash flow I generated in the last post. Now I look forward to further studying your analysis. Thanks for sharing. Best, Huey

To: Seeker of Truth who wrote (43790)	6/22/2001 12:01:33 PM
From: Pirah Naman	Read Replies (1) \| Respond to of 54805

Malcolm: Having built the best, sooner or later they can charge a fancy price for it. The best is worth more. As far as losing money in the beginning or only breaking even after several years, that goes with the territory. I think that even if the authors did not want to get into valuation, the book would have been enhanced by giving readers some more on this topic. Suggest guidelines for when it should be expected that the gorilla pricing power will show, or where the lack of pricing power may indicate a weak (or not yet) gorilla. Comments? - Pirah