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

To: Stock Farmer who wrote (57657)	2/19/2002 7:35:49 AM
From: Boca_PETE	Read Replies (2) \| Respond to of 77400

John Shannon - I complement you on the clear way you set out all of the relevant numbers from CISCO's reports. To me, it makes absolutely no sense to say CISCO "shareholders parted with $21 billions" when that $21 billions ended up being received by CISCO employee shareholders who bought their shares from the company for $3,052. IMHO, the payment of $21 billions by one group of CISCO shareholders to another group of CISCO shareholders has nothing to do with CISCO itself. Because accounting should ultimately follow economics (cash flows), this is the crux of why IMHO it makes absolutely no sense for CISCO or any other company to book stock option compensation expense. The undeniable economic reality is that this so-called stock option compensation expense is never funded by CISCO - it's funded by other existing or new shareholders of CISCO directly and it accountable in the books of the funding shareholder as CISCO share cost basis, not on the books of CISCO as an expense of CISCO. Instead, CISCO itself actually receives $3,052 cash from employees exercising their stock option which results in an expansion of raised capital and receives $6,091 in cash from the IRS in the form of reduced corporate income taxes payable which increases CISCO's net income and retained earnings. When you say "This is not exactly a sustainable recipe for 'get rich quick'", I would respond that the price of CISCO's stock and all other stock is based on supply and demand. When investors lose sight of what they are buying when they buy stock in a company (ie. the present value of future dividends and earnings), stocks get valued like tulips got valued in Holland hundreds of years ago. The blame for this overvaluation can only be laid at the steps of the investor. P

To: Stock Farmer who wrote (57657)	2/19/2002 12:52:07 PM
From: RetiredNow	Read Replies (2) \| Respond to of 77400

Hi John, nice analysis. I think it highlights the problem very nicely. I'm thinking the way to solve the problem right quickly is to ban non-qualified options and leave only the incentive stock options available for distribution. That way the full effect is noted within the income statement, so shareholders can make a quick judgement on whether they think it is worth funding a company that practices this much dilution. My guess is that you'd see a substantial paring back of options given out in order to ensure the company increases earnings. This would bring us back in line with focusing the company's structure on increasing economic value, not robbing peter to pay paul.

To: Stock Farmer who wrote (57657)	2/19/2002 12:54:56 PM
From: Lizzie Tudor	Read Replies (2) \| Respond to of 77400

OK - fyi Oracle magazine did a piece a while back about engineers inside Oracle vs. those implementing the same products in the field (consulting). The consultants made about $300K. Those inside Oracle made half that or less, but had options, without the options they would certainly have left. So the question would be whether it is better for Oracle (or Cisco, whoever) to just raise the engineering salaries to the mkt rate of $150/hr or continue to grant the options "at shareholder expense". Which would you prefer from the shareholders perspective? L