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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: GVTucker who wrote (67896)	5/17/2005 4:54:22 PM
From: RetiredNow	Read Replies (1) \| Respond to of 77400

I agree that it shouldn't, but I guarantee you that if Cisco can pull off this new security thing and the market thinks the new security will result in lower options expenses, then this stock will add a couple dollars in price within the week following a positive nod from the SEC. The reason why is the market has already priced in the future hit of expensing stock options, based on the Black Scholes model reported in Cisco's footnotes. Reduce that figure and everyone's EPS estimates go up. Higher EPS with the same PE forecasts increases stock price forecasts by the analysts, which will put upward pressure on the stock price. Nothing fundamental to the company will have changed, but the market valuation will change as the uncertainty is erased in a nice upside surprise sort of way. JMHO. The rest of us who value companies based on free cash flows will all be scratching our heads at those animal spirits in the market.

To: GVTucker who wrote (67896)	5/17/2005 7:50:51 PM
From: rkral	Respond to of 77400

GVTucker, differing opinions make a market. <g> But seriously, it's just a matter of time before everyone realizes accrual basis accounting for options is a REAL expense, albeit only an estimate of the cash basis accounting that occurs later. Ron

To: GVTucker who wrote (67896)	5/17/2005 8:37:47 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 77400

You're talking about an increase in earnings because of an artificial accounting construct rather than an increase in earnings from operations. And for the former, I don't think it will impact equity prices at all. I know for sure it shouldn't impact equity prices. Agree about the "it shouldn't" part 100%. But what is and what should be aren't necessarily the same. If the accounting value shouldn't matter, and if indeed it doesn't matter, then what the heck are Chambers and the entire tech lobby wasting everybody's time arguing about? It wouldn't be inconsistent to operate on the assumption that Chambers believes that the accounting value of stock options does matter. Whether it should or not. Indeed, if the accounting value of options matters enough for these high powered folks to be doing some pretty phenomenal arm-twisting on capital hill, then it's obviously important to look at who gains and who loses from getting it wrong, and to what degree, and their personal involvement in being able to determine the rightness and wrongness of it all. Because if those who gain from getting it wrong have a say in getting it wrong... well, that's like suggesting it's a good idea to hire foxes to design chicken coops.