Seattle based Microsoft has been squeeky clean since 1998.
Some think its a east/west coast thing, I think its a silicon valley thing, and yet I did recently get fu$ked in San Diego by a software company who booked false revenue.
Its now delisted, but the last person I saw buying it was silicon valeeeeeys software guru Dizzie tudor.
>>EMC Corp. broke ranks with its technology industry peers yesterday by reporting the financial impact of executive stock options in its second-quarter earnings report.
Several companies in more traditional industries, such as Coca-Cola Co. and the Washington Post Co., have moved to count stock options as business expenses this week, steps that could boost investor confidence in the wake of disastrous accounting surprises at Enron Corp., WorldCom, and elsewhere. The technology sector, where stock options have been a chief form of executive pay, has been a vocal opponent of the campaign.
EMC's filing represented a compromise between the two positions, as the Hopkinton data-storage giant issued a traditional income statement that did not account for the options, plus a "supplemental" table spelling out the earnings adjustments it would have incurred had the stock options been treated as expenses.
Microsoft Corp. has made a similar quarterly disclosure since 1998, but few other technology leaders do so. Yesterday, executives at Cisco Systems, Oracle Corp., and Intel declined to comment on EMC's move, and repeated their belief that current financial reporting is adequate.
"Expensing options brings more confusion to financial reporting because of flawed valuation methods," said Steve Langdon, a spokesman for Cisco.
Lobbyists who represent these companies endorsed the extra reporting, however.
"I think you'll see others in the industry follow," said Connie Correll, executive vice president of Technet, a Palo Alto, Calif.-based trade group that is urging its members to adopt similar steps.
Had EMC expensed its options, the table showed, the company's costs would have increased $92 million, and its net income would have shifted from a profit of $808,000 to a loss of $91.2 million for the three months ended June 30.
EMC previously had disclosed the cost of options only once a year, as rules require. EMC chief financial officer William Teuber said in an interview the extra figures were appropriate "to increase the transparency of our financials."
Teuber said he made the change after investors started asking about the cost of options after its first-quarter results were released in April and said he expects new rules may force such disclosures soon in any case.
"Obviously, with the conversations going on in D.C., something's going to happen. I'm not convinced the existing rules and ways will survive," he said.
Some investors have urged companies like EMC to go further, by including the costs of stock options in their income statements.
"We think it's important that all compensation costs be reflected in the expenses we report," said Coke spokeswoman Kari Bjorhus.
EMC said it didn't expense options outright partly to stay in line with common accounting practices.
But Teuber noted many of the other companies moving toward the disclosures are located along the Eastern Seaboard, including Gillette Co., as opposed to Silicon Valley giants that report only annually.
"Maybe it's an East Coast vs. West Coast thought pattern," Teuber said.
Microsoft earnings, released yesterday, showed that had the company included the impact of stock options on profit, its net income would been reduced to $903 million from $1.5 billion.
Stock options allow holders to buy company shares at a predetermined price, and in theory give employees incentives to work hard to build successful companies whose stock value can soar. They became a chief currency of the dot-com boom, but can also underlay massive payouts for senior executives at established companies.
The value of options is often calculated using a tool know as the Black-Scholes model. Technology executives often argue the model isn't appropriate to value options issued to employees of start-up companies, which are long-term options that can't be traded, as the model assumes. EMC used the Black-Scholes model, for lack of a better accounting tool, Teuber said.
Even some technology lobbyists who question the model had praise for EMC's actions, however.
"They're increasing disclosure, and that's a good thing," said Mark Heesen, president of the National Venture Capital Association in Washington. "It's important to note they didn't put this into the income statement. So shareholders can decide for themselves if they buy Black-Scholes or not."
Heesen and others said they didn't know of other large technology companies that have taken such steps. But given the current political climate, he said, "I wouldn't be surprised if you see more companies doing something like this," he said.
Gary Helmig of Soundview Technology Group, a Connecticut investment bank, said EMC has provided other additional financial specifics recently as well.
"They wanted to clear the air that they're not having extraordinary compensation charges due to stock options," he said.
EMC's top executives are still well-paid; chief executive Joe Tucci received stock options worth an estimated $46.3 million according to its most recent proxy filing. Yesterday, Teuber said 87 percent of the company's employees hold stock options.
Total employment was 18,500 at the end of the quarter, EMC said on its conference call analysts yesterday morning, about 500 fewer people than it had said would be the low ebb of its work force following a round of layoffs begun last year. A spokesman attributed the difference to attrition and employees who left "for performance reasons," such as those fired for missing sales targets.
Aside from the stock-option reporting change, EMC's results yesterday were noteworthy for the continued investment they showed the company making in software development despite a continued bleak outlook for sales overall. EMC hopes its heavy R&D spending will position it as a market leader when technology spending resumes.
That won't be until next year, however, chief executive Tucci said during the conference call. "The hard cold fact is that I don't see capital spending improvements in '02," he said.
Meanwhile, tough price competition helped reduce its revenue to $1.39 billion for the three months ended June 30, from $2.02 billion for the same period a year earlier.
Its net loss was $11.2 million, or a penny a share, before an adjustment to a previous restructuring charge, compared with a profit of $108.9 million, or five cents a share, a year earlier. Including the adjustment, EMC said it earned $808,000 in the second quarter, or zero cents per share.
EMC said it is comfortable with estimates it will lose about a penny a share during the third quarter, then become profitable in the fourth quarter.<<
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