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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Greg Jung who wrote (7370)	4/19/1998 9:21:00 PM
From: Kip518	Read Replies (1) \| Respond to of 18691

Greg, this is not the piece reporting gross over-estimation of U.S. firm's profits due to non-accounting of employee stock options(haven't found that one yet, but believe it is from a UK accountancy study), but it is very interesting and shows the house of cards being built by employee stock options (of course, with the complicity of accountants and the markets). nytimes.com Kip

To: Greg Jung who wrote (7370)	4/19/1998 11:05:00 PM
From: Roger A. Babb	Read Replies (1) \| Respond to of 18691

Greg, I agree that EPS would be greatly lowered for most tech stocks if all options were properly accounted. CTXS is a case in point, see posts on the CTXS thread for an exhaustive debate on this point. CTXS has 41 million shares outstanding, but has hit its 60 million limit due to shares reserved for options and is increasing the share total to 150 million. EPS calculations were reported using 44 million shares, not the real obligation of 60 million resulting in a 36% overstatement of earnings. There are several tech stocks in this same ballpark. Some argue that the options should not be counted yet, or use some funky computer model that discounts them. But the fact is that the obligation to issue the options exists and there will soon be a larger number of shares to spread earnings over. These stocks must grow total dollar earnings at a rapid clip to keep EPS from shrinking because of the growing share total.

To: Greg Jung who wrote (7370)	4/19/1998 11:43:00 PM
From: Pancho Villa	Read Replies (2) \| Respond to of 18691

>There was a short report on Bloomberg radio about a group saying the stock options, etc. were not well accounted for in US corps, and if they were, earnings would be 30-35% lower. < The 30-35% may be correct due to the high market run up of the last couple of years. The cost of stock options is always placed in a footnote far down in the 10K/Q. The press, people keeping financial statistics such us Zacks/First call don't pick this up. Anyway no one cares! These are considered just minor details in within the big picture of the new economic order in which financial/economic and social chaos in Asia will never hit the USA's technology/computers/internet based self-contained economy:-) Pancho