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

To: The Duke of URL© who wrote (179967)	12/20/2004 8:07:40 PM
From: Saturn V	Read Replies (1) \| Respond to of 186894

B E C A U S E ..You are double deducting it. When the company issues an option or even the stock itself THE COMPANY EARNINGS DON'T CHANGE A PENNY. The same is true of the Black-Scholes calculation. Once on account of the Black Scholes calculation. And then once again when the eventual dilution does indeed occur when the shares are indeed exercised. But the dilution based calculation is not subject to the problems of estimating volatility etc.

To: The Duke of URL© who wrote (179967)	12/20/2004 11:10:56 PM
From: rkral	Read Replies (1) \| Respond to of 186894

Duke of URL, re "It is in effect a gift by the outstanding shareholders of part of their ownership rights in the future income of the company to employees for working hard." But it's more than that. Existing stockholders also lose part of their ownership rights to existing stockholders' equity. For example, assume 10 shares represent ownership in $110 of equity and a company has net income of $22 during the next year ... ... with no dilution, EPS is $2.20 and equity per share increases from $11 to $13.20. ... with 1 share dilution during the year, EPS is reduced $2.00. However, equity per share only increases from $11 to $12. That 1 share dilution cost didn't just cost existing shareholders $0.20 ($2.20 - $2). It cost them $2.20 ($13.20 - $12). That sure suggests some expenses are missing somewhere. Ron

To: The Duke of URL© who wrote (179967)	12/21/2004 1:48:22 PM
From: Saturn V	Respond to of 186894

Upon further reflection I wish to modify my earlier post. Nothing is being counted twice in my proposal. With my proposal the earnings/dilution is showing up at the option grant time, as opposed to the exercise time. The dilution is showing up earlier than Intel's present practice. My proposal could be modified to charge the expense at the option vesting time, so the expense can be staggered, and expense is eliminated for the employees who terminate before vesting happens. Agreed the expense is a mythical expense, and can show up in the Balance Sheet as that. But my proposal is better than using the Black-Scholes Model which can be misused due to differing volatility assumptions, and again the expense is a mythical expense which will also have to be adjusted on the Balance sheet.