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

To: hueyone who wrote (118999)	5/20/2002 9:44:33 AM
From: Elroy	Read Replies (1) \| Respond to of 152472

If two different shareholders were each granted the option to purchase one single share of Q, but one shareholder was granted the right to purchase Q at $25 per share and the second shareholder was granted the right to purchase to purchase Q at $32 per share, the estimated option expense would be different for each case, even while the impact from dilution of adding one more share would be identical in each case. Nope, the expense to the company is contained in the dilutive affect. The expense is the dilution the outstanding shares may experience if the options get in the money. The chance of dilution of the $25 option are probably higher than the $32 option. But if the shares are at, for example, $2 and the options last one year the "expense" and likely dilution are both zero, whereas if the shares are at $40 when the options were issues, the likely dilution of both options are one share, and the "expense", if that is what you want to call it, are $15 and $8, but if you count both the dilutive share and the "expense" you've double counted. At least that's how I understand it. So stock option expense must be calculated separately from dilution effect. Stock option expense doesn't need to be counted at all because the negative affect of options is factored in by dilution would be my answer. "By the way, I have never once seen this argument (double counting) asserted in any of the numerous articles I have read regarding expensing stock options, many of which have contained arguments from both sides. Just shows you how many people are out there writing about things they don't understand! Elroy

To: hueyone who wrote (118999)	5/21/2002 11:46:06 PM
From: Clarksterh	Read Replies (5) \| Respond to of 152472

Huey - The Financial Accounting Standards Board, the International Accounting Standards Board, the Council of Institutional Investors, Warren Buffet, Alan Greenspan, Paul Volcker, Standard and Poors, 2001 Nobel prize winner Joseph Stiglitz as well as the accounting departments of many Wall Street firms all disagree with you. And I can't figure out where any of these folks stand to line their pocketbooks from taking this position. Oddly it impresses me very little that an economist, or a flock of economists, believe that this is a good thing. I trust economists to be able to derive interesting things given any particular set of assumptions, but I trust them not at all to pick a particularly good set of assumptions. The assumptions tend to be more philosophical in nature than anything else. Remember the two Nobel Prize winning economists who actually believed they could run a zero risk hedge fund? Or the many Nobel Prize winning economists who believe in 'efficient markets'? Or the fact that until very recently the major tenet of economics was that people behaved rationally (in contrast it is now accepted that people do not behave rationally in many many economic settings)? This is a philosophical question more than a economic question. (e.g. which method of reporting is easiest for the public to understand, and most representative of future performance.) Clark