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Technology Stocks : Siebel Systems (SEBL) - strong buy? -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (5937)	6/8/2002 11:16:43 AM
From: hueyone	Read Replies (1) \| Respond to of 6974

Thanks. I am having a problem with the word, "inure", however, even it is further described with the adverb "might". From my American Heritage Dictionary: Inure---To make used to something undesireable by prolonged subjection: though the food became more palatable, he soon became sufficiently inured to it.<g> Buckley: I posted (your 491 million free cash flow number) as an alternative way to evaluate Siebel's success that might inure to stockholders. My guess is that you have made a mistake using the word "inure". Best, Huey

To: Mike Buckley who wrote (5937)	6/8/2002 11:55:35 AM
From: hueyone	Read Replies (2) \| Respond to of 6974

If I remember correctly (it's been a few months since I looked up the data), if all the stock options were exercised today there would be about 35% more shares of stock. Assuming there are no other changes in the company's fundamentals, in theory the stock price would drop by about 25% due to nothing other than the sudden stock dilution. Let's assume for discussion purposes that your figures above are all correct, but, even if we do so, your analysis is still left with a major problem. Your analysis only accounts for one of the two components of employee stock option compensation costs---the dilution cost. If the impact from employee stock options was only a dilution cost, then it wouldn't make a rats ass difference what the strike price is or what the market price is at exercise, or alternatively, it would not make a rat's ass difference what price the company could sell these same shares to the public for at full value, or alternatively it would not make a rat's ass difference what the value of the these options are at grant using Black Scholes valuation model, but these things do matter. (Too many rat’s asses here <gg>). As soon as options are granted there is an estimated value and as soon as they are exercised, it is easy to calculate an actual value. (By the way, Buffet can calculate an actual cash value at any time---even when the options are underwater.) Simply taking into account the dilution impact does not capture the full costs of employee stock options. fortune.com. Giving out options costs a company's shareholders in two ways. The first is by diluting their stake in the company. When employees exercise their options, a company has to issue new shares. This means there are more shares outstanding, which in turn means the stake of existing shareholders in the company is reduced. So when an option is issued, it amounts to a claim on the company-- think of it as someone putting a lien on your house. And the only way to find out about that lien is to look deep in the footnotes of the annual report. The other price shareholders pay is the opportunity cost their company incurs by selling shares at a low price to employees instead of selling them at full price to investors. If a company were to take all those discounted shares and sell them instead on the open market, it would of course have a lot more cash to spend. And whatever it spent that cash on--machines, consultants, salaries, bonuses--would show up as an expense on the income statement. In economic terms there is no difference between compensating employees by giving them cash and paying them with securities that they can convert into cash. To put it another way: If selling shares to the public and using the proceeds to pay an employee is a cost, then selling those shares to that same employee at a discount (and letting him book the resale profit) is no less a cost. Best, Huey

To: Mike Buckley who wrote (5937)	6/8/2002 12:52:41 PM
From: chojiro	Read Replies (2) \| Respond to of 6974

Mike, that 25% loss is not important to an investor if in the long term it is reversed and the shares in fact show an appreciation. I do not believe that is or will be the case with SEBL. I know a bunch of people here defend Tom's options as normal or routine. However I have quite a different view. I believe through his options game he is bleeding this dying horse at an ever rapid rate. How long do you think it will be before they end up doing a reverse split to lighten the burden(which Tom created) on the shareholders or to keep their NASDQ listing? Wow, a lot of talk recently here about options, I had to hunt this reference post(from only two months ago) down deep in the search. #reply-17353774