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To: Lizzie Tudor who wrote (18220)	7/19/2003 7:42:53 PM
From: hueyone	Read Replies (1) \| Respond to of 19079

A few months ago on the Cisco thread, you criticized Black Scholes by saying the only fair way to expense was at exercise, taking the difference between market price and exercise price at time of exercise. I am sure SEBL's reported expenses over the last seven years would be much higher if we used your suggestion, and if you want me to, I will report on expenses using that method sometime. There has to be a better way, I suggest expensing the actual value* of options at exercise... nobody can really argue with that---Lizzie Tudor #reply-18860260 Regarding money in the bank--- when shareholders pay a large portion of employee compensation by buying the shares that insiders continually unload, and when the insiders continually exercise options which also puts cash in the company, companies who are not profitable by mine and FASB's preferred standards of profitability (which include expensing stock options) can build up their cash positions and appear profitable to casual investors. The company reduces their cash outlays by substituting options for cash, as well as has money coming in from exercise of options. Tom has said as such in his annual meetings. (Company will not be profitable using Black Scholes.)* For good reason, Tom Siebel has been called clueless with respect to corporate governance by shareholder advocacy groups #reply-19023976 , and I certainly don't put much faith in Tom's self serving financial analysis regarding options use. Ironically, this great criticizer of Black Scholes methodology, used Black Sholes valuation method himself to calculate the value of employee stock options when the company offered to buy back employee stock options last year. And the same man is also in jeopardy of losing a court case where he can wind up with punitive damages for misrepresenting the company's options policies to shareholders---though he is still innocent until proven guilty. investor.cnet.com The companies that are growing today are yahoo, amazon, ebay, broadcom, juniper, sonus even cisco and xilinx as big caps. I don't think you like any of those except maybe xilinx which of all of them is the most mature. I am not familiar enough with the financials of these companies to really comment on them, but my guess is that you have been doing quite well by investing in rapid revenue growth tech companies, regardless of underlying profitability, and some of which still have that "internet, new economy buzz" attached to them which appears to make a lot of people comfortable with wild "price to vision" valuations. Apparently a fair amount of the market agrees with you right now, so congratulations on your investments. But this only goes to support my point, imo, that much of the nineties contingent of SV companies and management have got a free ride compared to what has been expected out of management with regards to performance in the past. I don't recall management and employees in the eighties getting paid millions of dollars in compensation for running companies that were merely growing revenue fast and surviving. They had to produce profitability as well, a good return on paid in capital, and the reported profits didn't exclude huge chunks of the expenses like reported numbers do today. Perhaps investors will continue to give this genre of companies a free ride, but this does not confirm that these companies are exceptionally managed. But it will make your wallet much fatter if it keeps on going, that is for sure. I'll bet the visionaries that started the high tech, fast growth airline business are wishing they had started their businesses today. As I recall, they were rewarded with very little for their visionary efforts, which impacted and improved the lives of all of us. I have heard that this is a good read (book) concerning the degradation of the quality of reported numbers in recent years: amazon.com JMO, Huey