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

To: rkral who wrote (5981)	6/10/2002 2:22:10 AM
From: hueyone	Read Replies (1) \| Respond to of 6974

Hi Ron: The 10k gives us the pro forma after tax net income number to give effect (Black Scholes) to SFAS 123 at negative 467.224 M. You have further adjusted this number to come up with a new pro forma after tax net income number of negative 521 M. I wonder about this. If the pro forma number given in the 10K says it has been adjusted to give effect to SFAS 123, then I think we should take it for what it says and leave it at minus 467.224 million without making further adjustments. Presumably the authors of the 10k already made the necessary adjustments to come up with their pro forma number. I also suspect the tax benefit from exercise of stock option is a tax credit that may not be included in 255 M GAAP after tax net income figure. The corporate logic here may be not to include it in GAAP for the purpose of avoiding having to explain to shareholders how they produced a tax benefit from stock options in the GAAP earnings number without having a corresponding expense. Of course, I could be wrong. No need to mess with the effective tax rate. We are given the after-tax rate numbers. I was intentionally working backward fom the change in net after tax income of minus 722 million for the purpose of determining what level of pre tax option expense would be necessary to produce that after tax drop of 722 M in net income. But I made a mistake. I should have divided the 722M by 1 minus the tax rate, or 63%, instead of 37%. This calculation indicates that 1.15 Billion dollars in pre tax stock option expense is necessary to produce a 722 million dollars drop in net after tax income. Further regarding these Black Scholes numbers, whether you are using your pro forma net income after tax number, the 10K pro forma net income after tax number, or my pro forma pre tax 1.15 billion dollars number, what do you make of these Black Scholes numbers? Does my pre tax number of 1.15 billion, (assuming you agree with my number which you don’t<g>) represent the value of all options on the day of grant amortized over the stated life of the options? I still am not clear what these Black Scholes numbers are telling us. Regarding the second set of calculations involving actual exercises of stock options, something doesn’t look right about the $12.31 market price average for exercise dates that you calculated. The stock only traded that low one time last year---on October 1. Surely not all the employees exercised their options on the low price for the entire year. Thanks for your participation. I look forward to your further comments. Best, Huey