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

To: Stock Farmer who wrote (62961)	2/7/2003 8:21:04 AM
From: Amy J	Read Replies (3) \| Respond to of 77400

Hi John, RE: "Has it ever occurred to you that maybe the use of stock options is excessive?" No, I don't think SOP% is excessive. Industry standard. SOP% = Total Stock Option Pool percentage is reasonably fixed. But I do think investors can get excessive. (Distribution of SOP <> SOP%) RE: "The whole argument that if they are expensed then the usage will go down suggests this to be true!" Not at all. ( If a tool is expensed, it doesn't make its use excessive. ) RE: "Surely therefore, shareholders have been making decisions about allocation based on a perceived cost far less than the real cost!" Were you buying Cisco's stock in 1999 - 2001? I know you weren't. You're smart. The value of Options is a % of the Valuation. Options belong in the cap table or proxy statement, not the income statement. Investors got caught up in a bubble and made a mistake in estimating valuation. That's not Cisco's fault, nor does it mean that rules should be created that hurt companies from creating growth. Why create a bad rule that hurts growth, when bubbles only happen every 70 years? RE: "maybe the thing has to do with the proposed reforms over stating the cost?" No, has to do with distorting costs. Also, I personally wouldn't want my financial statements messed up at my startup with this stuff - it would make the picture less than clear. Make it incredibly hard to drive right decisions with just an eyeball glance at the financials. The cap table or proxy statement is where it belongs. RE: "The whole argument actually supports reflecting the cost of stock options on the income statement." No RE: "Because if shareholders are already authorizing appropriate levels of options" SOP% are reasonably fixed. RE: "to get the right number being allocated even when the cost is =wrong" SOP% are reasonably fixed. RE: "the past six or so years has been about 8 Billions. Meantime, as I showed earlier, employees have been motivated to the tune of an additional 18 billion that didn't show up on the income statement." Did you buy CSCO in 1999-2001? (I know you didn't. Neither did I.) Investor's fault if they did, not Cisco's (). No need for Cisco to ruin their growth engine because of an incorrect decision by investor that bought Cisco at the peak and didn't recognize a bubble. () But Cisco could have done what Microsoft did, which was warn investors the stock was high - but Balmer took a lot of heat for that too and companies can get in trouble if they talk about their own stock prices. RE: "either that motivation is excessive, or it isn't." Investors got excessive. You're trying to blame the company for investor error, as well as ruin a good growth engine. RE: "If it is excessive, then we should cut it back." Investors should have cut back at the peak. A company should not be charged with changing their operations into slow-growing, dividend-style companies due to investors getting caught up in a bubble. RE: "we should all give a moment of silence for whomever ends up holding the shares last." I take it you aren't buying. Why not? RE: " Putting aside what other people think, and setting aside whether your opinion might be harmful to your pocketbook, what do you think? Has the current system led to abusive practice?" I've always been a Cisco investor, not a Cisco optionee. Also, I'm a co-founder of a startup, thus am an investor at my startup. (Founders are investors so sit on the same side of the table as investors.) I'm probably more sensitive to generating growth, and the requirements. RE: "Just because we personally benefit from abusive practices doesn't mean we should condone them. " It's equally important that when an investor gets hurt, it may be because of investor err, not the company. Who is abusing whom? Is the company or is the investor being abusive? (You aren't of course, but just wanted to toss that shocking comment out there only as a way to present a different perspective to others.) You seemed to do very well in the market, you may recall I sent you several PMs around 1999-2000 congratulating you (and thanking you) for your excellent posts. I may be wrong, but I think the thing you may be missing now is a near-exclusive focus on the accounting as it relates to a bubble. What would really be interesting, is to move beyond the bubble scenario (which I think is a rare bird) and talk about the future. What are you seeing in the way of the cost of options now? I value your posts a lot. I think the only place we don't see eye to eye is on the growth engine and what I perceive to be a focus on the accounting of a bubble, (which is valid if bubbles were to happen every year, not every 70 years.) Regards, Amy J