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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Peter J Hudson who wrote (114185)	2/24/2002 5:23:25 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

hi Pete, Opportunity cost is a real stretch. Qualcomm probably would have been better off investing that money in ebay too i don't think this is a fair comparison. QCOM is free to do a shelf offering any time it likes. when they sell shares (which they can print a lot of) they simply enlarge the pie. the money is received at the time of issue. as i see it, there is no ex ante risk involved. in contrast, investing in ebay would have carried the ex ante risk of capital loss. however, i will grant you that my characterization of "opportunity cost" is a little extreme--but not for your above reason. it is extreme in an "emperor has no clothes" type of sense: if QCOM (or JDSU, or CSCO, or [fill in your favorite bubble stock]) had actually tried to sell $10BILLION of shares to the public at the peak, i imagine people would wonder real hard if the stock wasn't overvalued and the co. was trying to "take advantage" of the situation. even more absurd would have been for JDSU to have tried to do a shelf offering of the $50BILLION or so that it has so famously written off. it would have been a brilliant maneuver, but i imagine the bubble party would have ended a lot sooner! so ironically, we didn't see those kinds of massive liquidations which one would expect from a highly intelligent management. certainly, cos used their valuable "coin" to buy other cos, but those cos were also overvalued, so it was a wash. about the only "case" i can think of where a large-cap bubble stock really converted their bubble valuation to something more stable was when AOL merged with time warner (that case is a smart dude!). of course, numerous executives sold out at or close to the top and are now very rich, but i don't think this happened on a companywide basis too much. Any criticism of employee stock option incentives has to be directed at the terms of the offering, not the resulting value at exercise if you follow your own argument to its logical conclusion, i believe you will see that cos should indeed book the expense. doing so would make cos appear less profitable! which would be more like the true economics as i see it. The huge profits that QCOM employees made on their company stock plans are no more sinister than the huge profits you made during the same period. nobody is saying their gains were "sinister". and again, i for one don't think QCOM is unique in this matter (you will notice that i rarely talk about QCOM employee options on this thread). but i truly believe the issue is not the action (of granting options), but the presentation (whereby no costs are booked for such grants). and i would like to see that changed for all cos.