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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (60262)	7/12/2002 9:16:48 AM
From: hueyone	Read Replies (2) \| Respond to of 77400

You see, if they passed the stock options expense law, then what they would deduct from the income statement is the amount of tax benefit that accrues to the company from the exercise of stock options. I assume you are referring to the Levin/McCain bill. How did you arrive at this conclusion? Of course the tax benefit from exercise of stock option is nowhere near the options expense as estimated by Black Scholes and is generally nowhere near the actual option expense as determined upon exercise. We have had quite long discussions as to what the impact of the Levin/McCain bill would be on Ron's thread, but unfortunately we have not been able to come to an agreement. I think the bill has already been killed by Silicon Valley execs bribing our legislaturers anyway.

To: RetiredNow who wrote (60262)	7/12/2002 9:59:16 AM
From: larry	Respond to of 77400

mind, Thanks a lot. good luck, larry!

To: RetiredNow who wrote (60262)	7/12/2002 10:34:00 AM
From: Stock Farmer	Read Replies (1) \| Respond to of 77400

mindmeld - seems whenever you hold a long position your lose your grip on the facts <ggg> if they passed the stock options expense law, then what they would deduct from the income statement is the amount of tax benefit that accrues to the company from the exercise of stock options. No. Turns out tax benefit would be ADDED to earnings after the corresponding cost of options would be SUBTRACTED. Here's how it works. Assuming tax rate is 35% then in your example 51 M$ is 35% of the total reported cost. Means the cost reported to the IRS is 145 M$. Under the bill, they'd have to have reported at least this much cost to shareholders. They'd be nuts to report more. So EBT would drop by 146, which would reduce taxes payable by 51 M$ and EAT would drop by 96 M$. Still a small number. That is, of course, if they are reporting the same cost of options to shareholders as they are to the Government. If passed, the bill allows them to report less, just not more. As far as I think last I checked the weighted average price of options was $22. The stock now trades at $14 or so. Like I said...worthless, again here are facts as of last 10-K (July '01) Total outstanding: 1,060 million Average exercise price: $29.41 (mostly harmless) However, that doesn't mean all options are worthless. 226 Million are outstanding with strikes less than $9 with average price of $4.45. That will cost Cisco shareholders 2 B$ worth of dilution (3 B$ to buy back, minus 1 B$ exercise) even if your investment at $14 breaks even with the mattress. More if you happen to profit. Another 255 million are outstanding with strikes ranging from $9 to $19, average price of $13.98. If your wishes come true and the stock really is worth $20, then these shares will end up costing another 3.4 B$ Worthless? A billion here, a billion there... pretty soon you're talking real money. John

To: RetiredNow who wrote (60262)	7/28/2002 11:07:02 AM
From: rkral	Read Replies (1) \| Respond to of 77400

OT ... You'll see that for the 9 months ended April 2002, Cisco experienced a total tax benefit from exercise of stock options of $51 million. Now Net Income for the same period of time was $1,121 million. So the total percent lower that earnings would have been for that period would have been 4.5%, not 67%. Sorry for this delayed reply, but I just returned from vacation. mm, you need to be looking at FAS 123 option grant costs to approximate ML's estimate of 67%. As a first approximation: 1) annualize the 9 month 2002 GAAP earnings; $1.972B x 1.33 = $2.63B, 2) assume FAS 123 costs for FY02 the same as FY01; ($1.014B)-($2.705) = $1.691B 3) calculate options cost percentage; $1.69/$2.63 = 64%. ML's estimate is likely "fine-tuned" to get their 67%. Ron P.S. For options discussions, please come visit Subject 53027.