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

To: hueyone who wrote (63645)	4/20/2003 1:06:28 PM
From: Lizzie Tudor	Read Replies (3) \| Respond to of 77400

Hueyone, my position all along has been that options cause dilution only and this dilution needs to be clearly elucidated somewhere in the filings as opposed to hidden like it is now. WRT expensing though, my primary gripe with the current proposals on the table is the black scholes estimates applied to determine some future value, brought forward as an expense today. I don't think that works- I think it is fundamentally flawed in so many ways but principally the IPO case is problematic and also the employee attached to the option is ignored, as if employee stock options are worth the same as a regular stock option. I'm just thinking of the covered call writing against equities case... writing naked calls are restricted for good reason, you can lose a fortune writing naked calls - expensing options where an employee is attached to the option but not in any way restricted to remain at the company reminds me of the naked call case. Anyway those are my 2 main issues. As far as expensing options actually exercised, I have far fewer issues with it. I still don't like it, I don't think there are any true expenses there and like BWAC I believe the true motivation is to curtail executive perks- (something that needs to be solved another way imo) but anyway at least with the expense as something actually exercised, you can handle the IPO situation and the worthless expiration issue from above. I really think there are so many issues with Black Scholes, if I were you guys and really was strongly in favor of expensing, I would drop black scholes and go for the actual exercised method. Not too many people can argue with that from an accuracy perspective, it is what it is. I guess the big issue is that if a company like Cisco grants a huge amt of options, the benefit is immediate and the "cost" is somehow deferred, and as an investor you'd want to know about this time bomb out there. But you can require grant amts and strike prices in the financials next to the dilution numbers. BTW I think lots of people are going to get a surprise if options are essentially disallowed which is the eventual outcome of this entire expensing debate. Staff at Cisco and lots of the big, well run companies are essentially underpaid in terms of compensation. People work alongside consultants so its pretty clear what the mkt value is for the better engineers. Options make it possible to underpay staff, and Cisco is taking advantage of it bigtime which is precisely why they are going for 1mm per employee and generating cash up the wazoo. I think the better institutional investors understand this.