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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (170380)	7/24/2002 5:00:02 AM
From: Elroy	Read Replies (2) \| Respond to of 176387

Options are a huge cost for many corporations and a huge benefit to executives. No wonder, then, that they have fought ferociously to avoid making a charge against their earnings. Without blushing, almost all C.E.O.'s have told their shareholders that options are cost-free. Here's what I've never understood about this argument of his. If a corporation grants stock options to its employees, doesn't that increase the fully diluted share count? If so, isn't the "cost" of the option captured in the increased fully diluted share count? If so, I don't think options should be expensed. The actual earnings of the corporation is unchanged, it is just spread over an increased share count. For example company A has 100 million shares and earns $100 million dollars in year XXX = $1 per share. Then say they had issued options for 10 million shares at the start of year XXX. I think (correct me if I'm wrong) that this increases the fully diluted share count, not sure to what but say 105 million shares. The company still earns $100 million dollars, but it is only 96 cents or so per share since there are more fully diluted shares out that if they hadn't issued the shares. If options are BOTH expensed AND affect fully diluted share count, are they being counted twice? If I am misunderstanding something here, please clarify. Elroy