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To: Lizzie Tudor who wrote (10659)	2/27/2002 3:17:53 PM
From: stockman_scott	Respond to of 57684

Employee Stock Options: Valuation Time Bomb or a Yawn? by George Athanassakos, Ph.D. An employee stock option is a right granted to an employee to purchase a particular number of shares for a fixed price over a defined period of time. Because the price does not change, the employee has effectively been given the ability to share in the company's growth during the life of the option. The New York Times (Apr. 4, 1999, p. BU9) reports that in a recent survey "options accounted for about half the total compensation paid to executives of 428 large companies." In Canada, Investment Executive (September 1998, p. 43) reports that "executives are now getting more than three and a half times their annual salary in option value." A number of articles that have appeared in the popular press sound an alarm about the proliferation of stock option plans and caution investors about the potentially harmful impact of stock options to companies' future profits and future valuation. This is said to be particularly alarming for NASDAQ stocks, which tend to issue a large number of employee stock options. Stock options lower worker-related compensation expenses, as instead of paying an employee a high salary, a company offers a lower cash salary plus stock options. An immediate income statement-related expense is lowered, and current income is inflated. The argument then goes that this will inflate stock prices and fool investors, as they do not realize that when these options are exercised, the difference between the stock price and the exercise price will be added to a company's expenses,1 leading to a profit decline. The larger the amount of options granted and the steeper the stock price appreciation, the higher the future profit deflation and stock price decline. To add insult to injury, the exercise of stock options will dilute earnings and existing shareholders' interest, resulting in a further stock price decline. Does this argument hold water? Rest of article: investmentreview.com Bottom line according to George Athanassakos, Ph.D.: Employee stock option granting is not worth all the worrying we see in the popular press.

To: Lizzie Tudor who wrote (10659)	2/27/2002 4:11:46 PM
From: Bill Harmond	Read Replies (1) \| Respond to of 57684

Late 1998 to early 2000, IMO.

To: Lizzie Tudor who wrote (10659)	2/27/2002 4:30:24 PM
From: Wizard	Respond to of 57684

I was referring 'bubble' to when the Q1 IT budget process stopped. Usually, around the holidays, companies determine their budget for the year. By January or early February, the budget is 'set'. In the bubble years, this process stopped as the world kind of lost its bearings and came into January on a spending spree. Budgets generally depend on revenues and profits and since revenues were exceeding plan so consistently and by substantial amounts, everyone knew they could spend, spend, spend and not worry about it. 1998 was not a bubble year. 1999 was a bubble year as the economy began really humming in mid-99. Q1 2000 was the ultimate bubble... Q1 2001 was a huge bust and the worst of the business spending recession (relative to expectations of growth). So we really haven't had a normal Q1 since 1998 or so. Calling 1995 to 1998 a bubble might be somewhat applicable to the telecom space as that is when CAPEX by service providers really started climbing as a % of revenues (funded with debt). The dot-com and hosting companies that bought cisco routers and sun servers and all else was certainly some of the worst (best?) of the bubble but that binge didn't really begin until late 1998 at the earliest.