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

To: hueyone who wrote (60749)	8/6/2002 11:04:57 PM
From: aladin	Read Replies (1) \| Respond to of 77400

Hueyone, You obviously have no idea how options are granted to most high tech employees. The majority of options are non-qualified. An option granted at $14.00 means the employee can buy it for 14, even if the price goes up. The company could get $14,000 for selling the 1,000 shares on the open market - but it also get that from the employee. There is no real expense here. The option amount ($14 in the example) is set at a market rate for the date issued - no discount. If sold at anything above 14 - the difference is taxable as income at whatever rate is applicable. Where is the expense? You could argue that issuing new shares dilutes value, but as a bottom line expense? No way. BTW - The number of shares held in reserve to cover options is reported - so any dilution is divilged. Now there are other types of options with different tax issues and even discounted prices. Most 'blue-chip' companies only issue these to upper management. There I agree with Buffett. His example has him being given the 20 million (he never mentions paying for the shares and only 'earning' the gain). John

To: hueyone who wrote (60749)	8/7/2002 1:51:45 AM
From: GraceZ	Read Replies (6) \| Respond to of 77400

1) If options aren't a form of compensation, what are they? What the employee has done is accepted equity in place of compensation. Ownership instead of cash. Stock is merely fractional ownership of a company and it holds all the privileges and risks surrounding ownership, it is not a promise to pay. Whether or not that fractional share or option on a fractional share can be sold on the market and for whatever price is irrelevant. Equity belongs on a balance sheet not a P/L statement.