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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Dan3 who wrote (169145)	8/8/2002 9:22:32 AM
From: Ted The Technician	Read Replies (1) \| Respond to of 186894

>>> It is very easy to show a $4 Billion annual discrepancy between their reported earnings and what filters through to the balance sheet, and most of that is due to buying back shares that were sold as exercised options. Let me try... from Jun 2001 to Jun 2002, the total net income was $2B. Total stockholder equity actually dropped(!!) from $36.7B to $35.6B or 1.1B. Repurchase and retirement of common stock from cash flow statement is about $1B per quarter. I'm missing a billion somewhere.

To: Dan3 who wrote (169145)	8/8/2002 11:26:24 AM
From: NITT	Read Replies (1) \| Respond to of 186894

re:"There is nothing to impute. You simply account for the difference between exercise price and market price at the time the options are exercised. As if the company were like any other option seller, and had to produce market price shares to be sold at the exercise price." If this was how the value of stock options was figured, and companies had to take the hit on the bottom line you could stick a fork in most of not all options plans. This is not how companies like Coke and GE plan to expense them. I believe the way those on the side of expensing options want it done is that the "Option Value" at the time of the grand should become the expense. The option value would be for example, figuring out what someone would pay you to have the right to purchase stock 5 years from now at todays price. In order to compute that value, companies would have to see what's going on in the option market and do some figuring to come up with a price. Some have suggested that companies auction some options on the open market to determine the price and then use that to set a value. I see more problems with this then just informing the public of the impact of the program on shares outstanding. Another issue is that times of "irrational exuberance" in the words of AG would drive the value of the option out of this world and force companies to issue a huge expense when in fact the options may end up worthless in 5 years. You could argue that is how the market works and in times of “irrational pessimism” option value would be down, but in fact only a very very small percentage of the total investment community actually trades options, and in many cases they are traded buy “gamblers” or as a hedge vehicle. If you asked the average employee to actually take money out of there pocket to buy an option, I expect the take rate would be very low… which would actually create a more real world value, but that method is not very workable. I think trying to establish an "Option Value" based on the open market is yet another place to confuse shareholders on what really matters, versus Intel's concept of showing the impact on dilution and suggesting that transparency in executive compensation along with board independence be the focus. Another point to look at is the government (Federal and State) that saw a real windfall from stock options in the 90’s when employees exercised Non-qualified option or sold any option. If options go away they lose that opportunity. If options programs remain, but require expensing, the government loses tax revenue from corporations as the option is expensed against earnings. The corporate bashers who are after the likes of Enron and Worldcom execs to support the "little guy" would be screwing more regular employees (engineers, admins, factory workers) at a companies like Intel, while doing little to get the real abusers. How about we focus on companies whose option programs enrich the fat cats... maybe you create a measure for highly compensated versus all participants ratio and require expensing in cases where options to the fat cats rises to a certain percentage. At least with this model you could argue that these people would have the means to be "gamblers" on the options market versus the average employee. My take is GE and Coke would see this as unfair because they might fall above the line with the exec only plans and an Intel, Cisco, or MS might end up below the line because they distribute options across the employee base. JMO Nitt