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

To: Don Lloyd who wrote (64258)	7/9/2003 9:42:21 AM
From: rkral	Read Replies (1) \| Respond to of 77400

OT .. Don, re "It might have to do with the fact that even though expensing stock or option grants or not has NO effect on free cash flow, which is indeed one of the arguments that supporters of expensing often use, ..." That's mostly because many proponents believe FCF should be operating FCF, i.e., FCF from operating activities, excluding FCF from financing activities. I agree with them. re ".. the actual option grants themselves DO provide substantial real free cash flow to the company AND its shareholders .." Agreed, but it is FCF from financing activities .. selling call options and stock to employees. re ".. it remains to be seen just how company managements that drop options completely will justify this obvious violation of fiduciary responsibility." Huh? You just posted "expensing stock or option grants has NO effect on [edit: total] free cash flow", and I agree. So where is the "violation of fiduciary responsibility"? Regards, Ron

To: Don Lloyd who wrote (64258)	7/9/2003 10:19:29 AM
From: hueyone	Read Replies (1) \| Respond to of 77400

the actual option grants themselves DO provide substantial real free cash flow to the company Stock option grants do raise indeed raise the free cash flow of the company, but they do it on the backs of ignorant outside shareholders paying for and subsidizing this free cash flow, paying for employee compensation. That is why I always have to get a chuckle out of the new economy valuationists bragging about their tech company's free cash flow, while not admitting or realizing that they as outside shareholders are the ones that are paying for it. Imo, the fidicuiary responsibility of company executives is to maximize free cash flow generated by company operations, not to maximize free cash flow that is generated by having outside shareholders pay for more and more of the company expenses. My shareholders in my privately held companies would laugh me right out of my jobs if I suggested my fiduciary responsibility as lead executive was to maximize company free cash flow by having the outside shareholders ponying up more dough to cover employee compensation expense. Yet in tech companies, we see this going on all the time, and we have ignorant, public shareholders rewarding executives with hundreds of million dollars in compensation for producing free cash flow that is nothing more than a transfer of wealth from the outside shareholders to the company. While perfectly legal, this has been one of the great financial scams of all time, but with MSFT stepping up and taking a position of integrity on this matter, the support for this non shareholder friendly style of business will slowly crumble. JMO, Huey