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

To: Lizzie Tudor who wrote (64159)	6/1/2003 6:25:04 PM
From: Stock Farmer	Respond to of 77400

No lizzie, these are different issues. Let's see... over the long term we can expect Cisco to trade close some price, call it "X". But in the short term, it can fluctuate quite considerably. A long term estimate (e.g. the next 4 years) and short term behavior (e.g. the next six months) are often quite different. The reason we don't issue exchange traded options during the stabilization period following IPO is not so much that we don't have an idea of where the eventual price is headed, but more because we don't have an idea of where it will go in the next few months. There is a big difference. I did not say you couldn't price options. I said that one could get taken to the cleaners by a counter-party who has market-making ability, and I WAS TALKING ABOUT THE SHORT TERM. If you want to extrapolate to the long term, be my guest, but remember that we are discussing an estimation tool, not a prediction tool. So an estimate is bound to be wrong, it's just the magnitude and direction of the deviation that is unknown. Kind of like estimating the value of inventory for products that haven't been shipped yet. It's not like we don't do these things or that they are new problems in business. But for some reason you are attempting to attach additional significance to "uncertainty" in the case of stock options. I have said before that using black scholes is an issue. The more you look into it, the more holes you find. You don't need to look very far for holes. Check after the "c" in "Scholes". Feel free to find a method of estimating the cost of stock options that is better, and I guarantee I'll use it. If you will :) I'm not sure why so many are in favor of Black-Scholes, could it be that you feel a need to attach the expense at grant because that is a cleaner linkage to compensation? Yes. Of a range of evil estimates, replete with holes as is the nature of estimates, Black-Scholes is the least evil of a host of evil alternatives. Like estimating the value of inventory. Or depreciation. It's not like this is the first time we estimate things that show up to impact earnings. Feel free to pick a better science, but until the Lizzie Tudor method is demonstrated to be less inaccurate, Black-Scholes is the best of what we've got. For any stock worth buying, it's likely to give a better result than than zero! As far as Google being crushed by options, I think you are falling prey to "FUD" from the other side. Since when does anybody buy a stock based on current earnings? Let me guess, are you buying Cisco because of its current EPS, or because of expectations that some day in the future it will return a fortune? It's hardly surprising that John Doer, a VC with product to unload, wouldn't be lobbying all over Washington to make sure his position is protected. It's not like he wants to sit on a bunch of aging preferred shares for as long as it takes management to figure out how to turn the company profitable, net of wage subsidies paid by shareholders. That would certainly put a crimp in his ability to turn a tidy profit on stuff that isn't worth as much as Joe 6 Pack thinks it is. Duuh... Whatever happened to earning an honest wage? And speaking of putting your trust in the VCs and investment banks and a host of tech insiders, aren't they the ones fixing to SELL us the shares? Don't you think their motives aren't just a smidgen biased to make sure we pay the HIGHEST possible price? It's kind of pathetic that the right thing for "the economy" (don't you mean "my standard of living") is for hardworking Americans to subsidize the wages of techies 'cause the companies they work for wouldn't be able to pay 'em millions of dollars and still make a profit. And instead of reporting this fact out in the open to our hardworking Americans, we have to conceal it from them in itsy bitsy cryptic footnotes buried deep inside some income statement that even the smart people like you don't bother to read or understand. It's hardly surprising that folks willing to live on a meagre five times the average planetary wage are standing in line to take your job, since you will only do it if you are paid twenty times the average planetary wage. And you complain about your employers taking them up on this offer? LOL... When Google comes out, we can take a crack at valuing stock options that are granted. We might even argue about what the options are worth. But one thing is clear. If these things aren't worth much, then an investment in Google won't be worth very much either except to flip to some unsuspecting sucker. Think about it. John

To: Lizzie Tudor who wrote (64159)	6/1/2003 6:34:38 PM
From: GVTucker	Read Replies (1) \| Respond to of 77400

John Doerr is privy to Google's actuals, and my guess is he is parrotting those numbers all over congress, in an attempt to illustrate what BS will do to new IPOs and the mandate that options expensing is supposed to serve- improved visibility. In fact I heard a rumor to that effect a few mos ago which is why I brought up Google on this thread. I very seriously doubt that John Doerr would disclose proprietary information like that to any outside party. That's a quick and sure way to kill his firm's image for good.