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To: Wallace Rivers who wrote (20738)	2/25/2005 10:26:18 AM
From: Amy J	Respond to of 78740

Bought some more Csco today. Regards, Amy J

To: Wallace Rivers who wrote (20738)	2/25/2005 11:33:11 PM
From: TimbaBear	Respond to of 78740

Do you know of any estimates of the potential impact of stock options on the bottom line? Look at Yahoo's breakdown of cash flow here: finance.yahoo.com Under Financing Activities... section, note the amount paid for stock buybacks (about $7.8B) and then compare the number of shares at the beginning and end of the period involved. That'll be the true cost as those purchases which didn't result in a drop in shares outstanding represented purchase of shares to prevent dilution from stock options. From Edgar here: sec.gov It looks like the shares outstanding dropped from 7,223M to 7,057M which is a reduction of 166M. Figuring about $30/share average cost of buyback, that would be about $5B. If they spent $7.8B total to buy back stock, then the cost of stock options appears to be just shy of $3B for last fiscal year. Of course, I'm tired and haven't researched it fully....so I could be all wet. Timba

To: Wallace Rivers who wrote (20738)	2/26/2005 12:44:35 PM
From: Spekulatius	Respond to of 78740

re CSCO and stock options. Timba's calculation of 3B$ is not too far off. The earnings stock option adjustment due to new regulations overestimate the economic impact of employee stock options. With Cisco the annual grant dilution is about 5%/year due to stock options. My rule of thumb to account for stock option dilution is to subtract half that grant rate (1/2*5%) from the long term growth rate to adjust for the adjusted growth rate per share (for comparison reasons). Another way to calculate the dilution is to look at the total number of stock option granted (about 1.5B$) multiply with the price/share (17$) and multiply this option base value with an assumed annual return(let's say 10%). This would yield a value of 2.55B$/year for Cisco's stock option expense. The problem with all those methods is that they scale with the companies underlying market value. Overall, i feel that Cisco 5% run rate of option dilution is about twice what it should be.