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To: Elmer who wrote (66333)	12/27/2001 12:25:33 AM
From: Joe NYC	Read Replies (1) \| Respond to of 275872

Elmer, why are you making this so complicated? It's much simpler. It would be so complicated if the purchases were upfront. I agree it's simpler: A company trying to grow can save cash by writing a call against something they can pull out of thin air (company stock). The scenarios are: - company does poorly, options are worthless, company never spent the cash. - company does ok, stock goes somewhat higher, company does not have enough cash to repurchase the shares, so new shares are issued, company does not spend cash, shareholders suffer dilution - company does very well, options are worth a fortune, because the stock is high, and to keep it high and shareholders content, some cash is spent to repurchase shares about equal to number of shares of net increase, so the company spends cash, but since it is doing very well, it can afford to spend it. Anyway, the key to the whole thing is that the new company trying to grow is always short of cash, and has a limited ability to borrow, and is unsure of its future, if it will even continue to exist in the future. Because of this, the whole idea of using considerable cash + borrowing power upfront is just an interesting theory, not how things are in reality. did Intel purchase a number of shares in a given year that was roughly equal to the number of options granted? ... The only question is how well that balances the number granted. My guess the number Intel is watching now is the "Shares Outstanding", which includes exerciseable shares. (That's what I would do). Suppose it is 200 shares, 10 get exercised, 4 expire and 15 new are issued. So my scenario would play out like this. # of shares outstanding 200 the starting point 200 after 10 get exercised (if using fully dilluted shares). Company pockets the money employees pay at original strike price 196 after 4 expire without being exercised 211 after new options are issued 200 after 11 shares are repurchased at market price I don't think it answers anything about upfront vs. afterwards. To me, it says that the company wants to transition away from pulling shares out of thin air (diluting shares in the process), and the company wants to take a stand at some # of shares. There is a cost associated with it, and this cost can't be overlooked. Joe