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

To: Stock Farmer who wrote (62789)	1/28/2003 1:21:45 PM
From: bofp	Read Replies (2) \| Respond to of 77400

OK, While the market may believe that a share is worth $60 or $13, that worth is built on expectation that ownership of that share will generate future cash flows - and by that, I mean total cash flows that can be claimed by equity holders. The impact of investments count. The paid-in capital by options exercizers count. The dilution of additional share issuance counts against you. Buying back shares counts as cash out and total shares reduced. Over the period in question, most of the shares issued were options. Meaning, that when the option is exercized (most in the money options are not exercized until the shares are to be sold or the options are to expire) the holder will have to pay in cash the strike price of the option. For most of the options exercized over the last 6 years, the current price is considerably lower than the strike price at which the option was exercize. Could I not argue that the options program actually generated wealth since the options holders "overpaid" for their shares? Furthermore, many of these options have not been exercized at all - we consider them diluted shares because of their future claim on cash flows, but since we are only considering wealth created in a discrete timeframe, shouldn't we exclude them since their paid in capital impact will be in the future if at all. In any case, I should not subract the market value of the securities underlying the options from cash flows - employees were given options NOT stock. The wealth creation calculation should be pure and simple. (LIQUID cash value of assets at end of period/ending FULLY diluted shares) - (LIQUID cash value of assets at beginning of period/beginning FULLY diluted shares). The value of options granted will be determined at the time of execution. We can try to estimate the costs to match them with income statement revenues but there is no such estimation on a cash flow statement. It is either cash now or it isn't on the statement.

To: Stock Farmer who wrote (62789)	1/28/2003 2:04:24 PM
From: GVTucker	Respond to of 77400

I think that there's an additional problem with stock options beyond what everyone is talking about here. (Not that what you're all saying doesn't have merit, it's just that what I'll mention has gone unnoticed by a lot of people.) When the stock option craze started to gain real momentum, one of the selling points was that it would tie executives to the same kind of goals as the shareholders. The executives do well when the shareholders do well, and the executives suffer when the shareholders suffer. Except that it hasn't worked that way. Yes, the executives have certainly done well while the shareholders have done well. But they haven't exactly suffered as of late even though the shareholders have suffered. 31 large companies have filed proxy statements so far this year. The median total return for 2002 for these 31 companies' stocks was -10.7%. Meanwhile, the median CEO received a 4.4% increase in base salary, a 6.6% increase in salary + bonus (so their bonus rose even faster than their salary), and, most absurdly, a 9.3% increase in total pay, which means that the present value of stock options rose at a faster rate than either salary or salary + bonus. (Kudos to Graef Crystal over at Bloomberg for the above data.) One note to keep this on topic a bit, credit should be given to Chambers at Cisco, who not only cut back his salary to $1 for fiscal 2002, as has been oft reported, but he also took no bonus and, most notably, he refused his right to receive options grants for 2,000,000 shares for fiscal 2002. Note also that he had cut his salary in fiscal 2001 also and received no bonus.

To: Stock Farmer who wrote (62789)	1/28/2003 5:44:09 PM
From: rkral	Respond to of 77400

John, A few more data points for CSCO's 7 years, 1996 thru 2002: Option Exercises 1.04B options exercised for $3.5B, or $3.50 per share average; 0.13B shares repurchased for $2.29B, or $17.60 per share average; Net of repurchases, 0.91B shares exercised for $1.21B, or $1.33 per share average; $6.62B tax benefit from option exercise This is surprising. The $6.62B tax benefit .. is 5 times the total due to exercise prices, net of repurchases. SFAS 123 option grant expenses, net of taxes $17.3B options expense incurred; $6.1B options expense amortized; $11.2B options expense liability remaining; Although I suspect you have them all handy already. Ron