Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Oracle Corporation (ORCL) -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (17741)	1/6/2003 1:08:09 AM
From: hueyone	Read Replies (3) \| Respond to of 19079

In post #17741 you wrote: This is true because these were options granted in 1991 which were expiring and Larry had to excercise or lose them. Hi Lizzie, I took the liberty of quoting you before you wrote the above line:<grin> In post #17739 I wrote: One of the reasons Oracle income is not impacted by stock options so badly on the Core Earnings measure is that I believe many of those options that Larry exercised in fiscal 2001 were granted a very long time ago, some as long ago as 1991 (according to Lizzie Tudor)...... And you went on to write: would I, as a shareholder prefer to own informix or sybase stock with executives that owned less of their respective companies and consequently were paid less? I seriously doubt you can make a case that companies have performed better for shareholders on average where the executives have been granted massive stock options. In fact, I strongly suspect the opposite is true: the true business performance of companies where executives are receiving high levels of stock options is often very poor--especially when measuring growth of earnings per share that can reasonably be expected to accumulate as wealth in the company--net of paid in capital. Often times, much of the "great" earnings and free cash flow some of these companies are reporting disappears in share buybacks, options buybacks or dilution, and never really accumulates as significant shareholder wealth. In addition, these "great reported earnings and free cash flows are heavily subsidized by massive paid in capital, fooling many investors into thinking that the business performance of many of these companies is better than it is. And please note again, I am making a distinction here between business performance and stock price performance. Take a look at the shareholder's equity section for Oracle for example: edgarscan.pwcglobal.com We have total shareholder's equity of 5.29 billion. But then looking further we see shareholders have put in 4.84 billion in to the company as additional "paid in capital". Then we see an "accumulated other comprehensive loss" of 84 million. So we can reasonably calculate that during Oracle's entire publicly traded lifetime (14 years) that Oracle has only generated 456 million dollars of actual paper dollar wealth from 4.84 billion dollars of paid in capital during its 14 year publicly traded existence. If you were the only shareholder of Oracle, and you could not reasonably expect to sell the company to someone else, thus being forced to rely strictly on Oracle's business performance for your well being, you would probably be seriously disappointed so far to learn that your 4.84 billion dollar investment had only produced a 9% total return (456 million dollars) over 14 years (assuming the 4.84 billion from shareholders came in the beginning which is not true). Now of course, Oracle has intellectual property, real estate and other intangible assets on the books that are not carried at market value, so it is up to you and me to decide what these assets will earn going forward and what they are worth and reflect them in our own estimates to determine Oracle's market capitalization. However, the fact is Oracle has not been any great shareholder equity building nor wealth building machine based on its actual past business performance (as opposed to the past stock price performance)and I suspect that is why the article I cited in post #17738 made the following statement: Although Oracle has been profitable for many years, the Corporate Library rates it as underperforming* the S&P 500 and its peers on total shareholder return.* On the other hand, Oracle has outperformed and smashed the S&P 500 performance as measured by stock price performance: finance.yahoo.com Regards, Huey