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To: PerryA who wrote (64615)	9/15/2003 10:19:53 PM
From: hueyone	Read Replies (2) \| Respond to of 77400

re: Reported Cash Flow from Operations an Free Cash Flow Perry, let's say FASB requires companies to expense stock options. Have you then got any comments about misleading cash flow from operations number, or do you have a concern there? It is looking to me like the next trick from the CFOs, when and if FASB requires expensing of stock options, will be to try to convince investors to ignore earnings and only look at cash flow from operations or free cash flow when valuing a company. Of course a company generally adds the amount of stock option compensation deducted from earnings back in to its cash flow from operations number on the cash flow statement. But the cash flow from operating and free cash flow numbers can be just as misleading as trumped up earnings---which now fail to expense stock options. Take Dell for example. Over the years they report great earnings and free cash flow to investors, but then much of these great reported earnings and free cash flow disappears to repurchase shares that merely offset dilution from stock option exercise. Investors buy even more Dell stock on the basis of the trumped up earnings reports and great free cash flow numbers, not realizing (or ignoring) the fact that a hefty percentage of the wealth that DEll reports goes down the drain to repurchase shares that merely offset dilution. Dell's Hollow Share Buybacks fool.com. Snip: Dell's problems are twofold. The first is that the company's employee stock option grants and option purchase plans have been so generous that most of the value created by its business gets redistributed from shareholders to employees. The second problem has been its policy of repurchasing shares at high prices to combat share dilution. Here is another article about Dell: The High Cost of Dell's Stock Option Program thestreet.com Regards, Huey