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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Elmer Phud who wrote (178421)	6/27/2004 12:55:11 PM
From: TimF	Read Replies (1) \| Respond to of 186894

The options are not the right to get free shares at no cost. Agreed, at least for most options. The options do not cause dilution because Intel is repurchasing more shares than exercised by grant holders My main point was that there is a cost, and apparently one not counted as an expense by GAAP to buying them back in order to prevent the dilution. I only wanted to dispel the notion that Intel's board of directors is no different from Enron's. Just to make it clear I am not arguing that the actions of Intel's board or senior execs has been anything like that of Enron's board and corporate officers. Intel's behavior in dealing with and accounting for options is as far as I can tell a fairly normal, wide spread, and legal practice. Tim

To: Elmer Phud who wrote (178421)	6/27/2004 2:40:57 PM
From: Ali Chen	Read Replies (1) \| Respond to of 186894

Ep, your addressing is all wrong: "The options are not the right to get free shares at no cost." At cost to who? For the company, there is clear no immediate cost, the cost is just deferred. "The options do not cause dilution because Intel is repurchasing more shares than exercised by grant holders." Finally, my endless effort to convey the fact that Intel's stock repurchase is exactly equal to stock dilution came to fruition, thanks. However, besides option grants, there are other sources of stock dilution that have the same effect as labor expenses - ESPP, stock conversions, I dont know what else. "It is reasonable to consider the shares delivered upon options exercise to be the same shares that were repurchased at the time of the original grant, at or near the grant price." No, it is not reasonable. Intel started the adequate repurchasing program when, about 8 years ago, right? At least if we consider the options exercised by employees during first few years, they were granted well before, when no repurchases were made. Therefore your theory is wrong. "It is reasonable to consider the shares repurchased today to be the shares that will eventually be delivered upon exercise of today's grants, at or near today's grant price." Illogical again. As you said yourself, Intel was buying more shares that were exercised, so there is no direct connection with options grant process. More, as I tried to educate you in my recent post, the options are virtually sold to a broker at FMV and are recorded as such to IRS. "The difference in value between the repurchase price and the share price on the day of exercise is "opportunity loss"." Wrong again. There is no other "option" but "option grant", thgere is no other opportunity for an employee to consider. You either accept a potential compensation, or decline the free option. If a company offers the stock option plan, there is no other "opportunity" for them to miss. "It is not necessary to consider the shares repurchased today to be the shares delivered today upon exercise of old grants." It is not necessary, but from an external observer they are. Not all repurchased shares are for delivery of exercised option, true. Some fraction of the repurchased stock must go to make up the difference in ESPP, as Lizzie pointed out recently (effectively). There must be some other payments made by shares, something like for conversion of shares during continuous chain of acquisitions, just my WAG. Employeer match to 401-k retirement plans are made in stock as well. "Intel's board of directors is no different from Enron's. That was a cheap shot by Carl and Ali" I don't recall making such a straight connection. I always endorsed Intels management as an example of perfect "financial engineering" within given rules (and subtle loopholes within thereof). So, my dear educator, go educate yourself. - Ali