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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (4270)	7/24/2002 12:37:44 PM
From: The Ox	Read Replies (3) \| Respond to of 95383

No one is suggesting that options should not be granted to employees and management. What he is suggesting is that many companies have hidden their exposure to options from their shareholders. Companies are hiding financial issues from their investors and it would be wise to add better transparency. Right now, it's an insider's game and many people have a real problem with this.

To: Cary Salsberg who wrote (4270)	7/24/2002 12:58:29 PM
From: BWAC	Respond to of 95383

I wish he'd exercise the option of putting some real carbonation back into that tepid sugar water KO sells now.

To: Cary Salsberg who wrote (4270)	7/27/2002 2:02:23 PM
From: Barry	Read Replies (1) \| Respond to of 95383

1st a disclaimer: I love tech oriented companies, and believe innovation has contributed the welfare of society more than any other occupation, be it the trains, automobiles, the extraction of energy, the field programmable gate array, or the post-it notes. It is the innovation of the brightest from around the world that come to america to enjoy the freedom of both thought and risk-taking that makes the grand ol'USA what it is and hopefully will continue to be. And Coke does more harm to the population in the long run while providing happiness in the short run. (Carbs) That said, options are options. There is no difference between an option granted to an AMAT employee from that of a Coca-Cola employee. It is a transfer of potential wealth (that which is generated beyond the option strike price) from current shareholders to that of the option-holder. Doesn't matter if you are an engineer doing chip design or designing a better bag to keep tortilla chips fresher. An option is an option. Buffett understands finance. Finance governs the value of a company. Options are finance-related. However, Buffett is wrong in one sense - the valuation of the options granted. Coke and the Washington Post are going to expense the value of options in accordance with the Black-Scholes pricing methodology. This can greatly understate (or sometimes overstate) the value of the options issued. To get a true perspective on the expense of compensation via options, one has to mark them to market, just as companies have to mark-to-market the valuation of their options used to hedge away interest rate risk, or currency movements. If the value of the options goes up during a given reporting period, the increase in value should decrease the reported income for that reporting period; likewise, if the value of options goes down, than 'income' will go up by the same amount because the cost of those options will have gone down. When the options are exercised, the impact of the options on the income statement can then be closed out. Yes, this adds volatility to the 'reported' earnings, and makes it harder to predict them to hand-feed to the analysts that pimp their stocks on wall street. CEOs better deal with it if they honestly think they are worth more than 10 times the average engineer, let alone the 100 times or more that they've been paying themselves through the issuance of generous stock option grants (some CEOs - not all. Look at Buffett. He pays himself $100k each year. Oh - no options granted to himself, either).