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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: jonkai who wrote (67268)	4/14/2002 3:09:53 AM
From: Exacctnt	Read Replies (3) \| Respond to of 74651

<<<they would need to spend about $45 billion just buying back shares so that your value doesn't get diluted by massive amounts just from the ESO's that exist now and/or may dilute in the future, let alone the ESO's that they grant every year to the tune of 200 million or so every year...... that's $11 billion dollars in shareholder dilution/debt they rack up every year from these grants.......(average for the past few years)>>> Once again you deliberately distort and lie about the impact of ESO's. Fact 1. There were 898 million option shares outstanding as of fiscal year end 2001. Using weighted average grant prices, approximately 533 million shares are in the money at current market price $55.93. Fact 2. If the 533 million shares in the money were exercised now and MSFT repurchased shares it would cost them $29.8 billion. However, MSFT will receive from the employees $16.2 billion. A net cost to MSFT of $13.6 billion. Fact 3. Like it or not, current regulations allow MSFT to claim tax credit on its $13.6 billion cost. Using a 33% tax rate. The cost to MSFT is reduced to $9.1 billion. This cost eliminates any outstanding option granted under the current market price. Fact 4. Of the 898 million options outstanding 210 million shares have a weighted average grant price at $68.28 per share. Another 155 million shares have a weighted average grant price at $89.91 per share. MSFT's net liability or net cost will increase and/or dilution will occur for these shares only when the stock price rises above the respective grant levels. Fact 5. If MSFT grants 200 million shares this year at the current market price of $55.93 per share, it will collect from its employees $11.2 billion dollars when they exercise the shares. To claim that it will dilute or cause debt in the amount of $11 billion implies that MSFT's stock price will double from the current market price. Your statement is completely off the mark unless you are admitting MSFT will double. Fact 6. The dilution affect of options in the money is already in the reported diluted earnings per share. Dilution will increase if MSFT's share price rises from the current market price. Your statement that a bigger dilution will occur implies that MSFT's stock price will increase from current levels and you obviously don't believe that will happen. MSFT's net liability or net cost of the current 533 million in the money options increases from the $9.1 billion mentioned above if MSFT share price increases. If MSFT grants 200 million new options this year, a net liability or a net cost will occur only if MSFT share price increases. You and the naysayers on this thread insist that MSFT is a poor investment and overvalued. IF that were true, then MSFT's liability or cost and/or dilution due to options won't increase. You cannot have it both ways. You cannot claim that the stock is headed lower or dead and also say that option liabilities will escalate.