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To: Don Lloyd who wrote (29396)	3/2/2003 10:02:49 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 74559

Not true. A company's stock (or options) are a limited resource. By resolution of the shareholders. They can not simply turn on the press and print an arbitrary number of them, any more than GM can stamp out an arbitrary number of hood ornaments. Metaphorically speaking. And the prohibited action is of benefit. By selling shares the depth of the corporate treasury is increased. It's called equity financing and the benefits are well understood. Feel free to argue in the case of Cisco that their 23 Billion dollar treasury isn't a tremendous asset. Versus the plight faced by LU and NT for example. Your caveat that "once needed funds are available" the value to owners is diminished is true. But point to me a company that has more liquidity on hand than it needs at the moment and I'll show you a company that probably issued a lot of stock options to get there <ggg>. So in the general case of a stock grant, for example, the company's limited authorized ability to issue outstanding shares is depleted. And the company forgoes the ability to increase the treasury by the market price of a share. And triggers the opportunity to incur the cost of a share buyback, to twist words around for the sake of meaning rather than definition. To cite specifics, at the moment Cisco is managing to contain dilution by spending every penny of earnings buying back it's stock. Forget "opportunity cost", this is a very real cost to shareholders. Despite billions of dollars in "profit", outstanding shares are pretty much where they were two years ago and shareholder equity has been heading in the wrong direction. I think that we need to stop splitting hairs however Don. Stock options have a cost to owners. It's a very real cost. Whether or not you want to argue it away. You claim it shows up as dilution. I agree. I am merely of the opinion that it should show up in the other places where cost is reflected. Like in the income reported to the IRS (where it does show up), and in the income reported to shareholders (where it does not). Your argument is variously (a) it isn't a cost, (b) it is a cost, but only one that should matter to owners, and (c) counting the cost as a deduction to reported earnings is counting it twice. Which is it: a cost which is being counted, or is it not a cost at all? Make up your mind please. I happen to recognize a cost to me when I see one. And I know whose pockets I'm picking when I issue stock options, or receive them. As far as dimensioning the cost in two different ways and reflecting it in two different places? Doesn't increase the cost, any more than looking in two mirrors doubles the amount of cars on the road. Automobiles have more than one mirror, all aimed slightly differently. Reduces the risk of something significant like a transport truck sneaking up unseen. And while some drivers can drive perfectly well with only one mirror, cars are made with several because the vast majority of drivers aren't so good after all. John