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

To: GVTucker who wrote (172710)	1/30/2003 12:13:15 PM
From: AK2004	Read Replies (1) \| Respond to of 186894

GVT re: Intel has never taken such a charge. I am sure you are right. But is it the only way to do it? What about strike prices of new options? (also applicable to AMD on a bit smaller scale) -Albert

To: GVTucker who wrote (172710)	1/30/2003 4:03:30 PM
From: Amy J	Read Replies (2) \| Respond to of 186894

Hi GV, RE: "If a company reprices options, that would necessitate a charge to earnings. Intel has never taken such a charge." Tradeoff is, dilution by refresh no charge (vs) non-dilutive by reprice but charge to earnings, right? But in a private company, wouldn't a reprice be a better option if a company is not profitable (because there would be no resulting tax hit on the charge). Said another way, can you conclude who in the valley is non-profitable if they've repriced -or- profitable if they've refreshed? (I'm asking) RE: "There is a "back door" way to reprice options without such a charge, but canceling the options, then waiting 30 days and issuing new ones. I have not seen Intel do this, either." Why wouldn't a startup do it this way? It would reset grant date, but couldn't vesting date be sent back to make up, so it's a wash on the dates with no impact to employees, no charge to company and non-dilutive to investors so how does this negatively impact anyone, what am I missing? Is this "back door" done often by startups? Is the strategy endorsed by the high-tech law firms? On another note, if startups had the choice of hiring someone at x% equity at $g, why wouldn't a startup simply hire at x-y% (reduce equity, so less painful to investors) at a discounted $g-$d (but create discount on grant price to make up equally, so its fair to new hire), where the cost of the discount on grant would be a charge to earnings that would hit the books, but it wouldn't be taxable if a startup decided to remain non-profitable in the year of hire (so who cares, right?), and the result is less dilution, meaning there's more SOPs to distribute to others. What are your thoughts on such a strategy, if such a strategy exists and is proper? And most important question: would the charge hit the books as it vests ($g-$d)/(#vesting yrs) per year, or all at once in the first year of grant? But would this strategy create a negative psychological risk onto negotiating a company's valuation in a round after applying such a strategy, where an investor may attempt to claim valuation is g-d rather than FMV = g, what do you think? Or, are discounts from FMV obviously recognized as discounts in the investment community, or is there a risk they could try to stuff that back down the existing shareholders by attempting to claim it wasn't a discount? If so, then wouldn't such a strategy create a huge risk (on valuation) by way of the PF:CS ratio during negotiations, and then not be worth doing? It feels like it would be a huge risk, but I'm hearing it's not at all? Regards, Amy J

To: GVTucker who wrote (172710)	2/5/2003 4:11:44 AM
From: Amy J	Read Replies (1) \| Respond to of 186894

Hi Vance, RE: "If a company reprices options, that would necessitate a charge to earnings. Intel has never taken such a charge." I'm curious why not reprice? What would be the estimated charge? I imagine it would be a nightmare to reprice for a large company due to different annual grant prices? But if issuing additional options to make up for underwater options is a dilutive event, then what's worse for an investor: dilution or a repricing charge? (Why would a repricing be a charge to earnings? I thought options weren't a charge? Or, is it only a repricing that is a charge to earnings? If so, why?) Or, is the reason why repricings aren't done, related to grant dates? I've never been involved in a repricing - so do grant dates stay the same? If so, then I could see why repricing would be a huge risk to a company - it wouldn't reward for staying. (You want to create a reward that's valid if people stay, which would instead mean issuing options.) I believe Intel's comp plan is quite competitive on the market for an employee that stays in order to realize gain, so my questions aren't attacking it, but instead simply trying to understand the financial side of their decision. I can see why Intel had to issue new options: to avoid a scenario where someone gets essentially a reset of their options at another firm. So, the new options avoid that and probably minimizes employees from running off to one of Intel's customers for funding, and when taken with underwater options, looking at the press release it would obviously have a huge potential for gain yet the risk would be lower than at a startup for an employee that stays. Probably lowers the cost spent on future competitive threats. Regards, Amy J