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

To: Amy J who wrote (172894)	2/7/2003 8:37:51 AM
From: steve harris	Read Replies (1) \| Respond to of 186894

Amy, re:options The executives know how much in stock they received in order to pay their taxes; Intel knows how much it costs to give these bonuses to the executives. That it looks bad is not a reason to ignore it and not show the expense. Steve

To: Amy J who wrote (172894)	2/7/2003 8:44:48 AM
From: GVTucker	Read Replies (1) \| Respond to of 186894

"Dennis Powell, Cisco's controller, said the company continues to believe stock options shouldn't be expensed, because they can't be fairly valued. For example, the options Cisco granted for the fiscal year ended July 2001 were valued at $3.3 billion. Today, using the same statistical model, those options would be valued at $131 million, because Cisco's stock price has dropped precipitously, Mr. Powell said." In the example used, the price of the options dropped. The fair value changed. That's what happens when you pay employees with a security that changes in value. Perhaps the following is this a way to come close to making both sides happy, or at least less irritated. Expense the actual cost rather than the estimated cost. Wait until the employees actually exercise the options, and charge earnings based upon the difference in the strike price and the actual market price of the stock. Yes, that violates a basic accountants' rule that you need to expense it when it happens, but if a company awards options as an ongoing practice, it will balance out and result in the same amount getting charged over the long run. And it definitely solves the problem that the dissenters have with Black-Scholes being an uncertain model. That said, I think that you and I have tacitly agreed to pretty much agree to disagree on this matter, true? Btw, last I checked, expensing options wasn't close to making it through any Congress initiative (there were a lot of proposals). Has something changed recently? I think that's accurate. And when you think about it, there's no reason for Congress to take a position on this one, since they really don't know what they're talking about here. On that I think we can both agree.