Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (27988)	5/6/1998 3:34:00 PM
From: Michael Bakunin	Read Replies (1) \| Respond to of 132070

The table is at forbes.com These figures are funny, too: "Smithers comes up with its figures by adding together the estimated value of options that were exercised during the year and the estimated cost of immunizing the company against future increases in its stock price, which would have the effect of upping its total option costs. The estimated immunization cost covers two factors: the difference between the share price and exercise price on existing options and costs associated with net new option grants." IMO, companies should just expense the market value of options granted. If there is no market in the options (how many 10-year options are trading?), companies shouldn't use them. Footnotes are suspect. From MSFT's last 10-K: 1) "Had the Company paid employees in cash the grant date Black-Scholes value of options vested in 1995, 1996, and 1997, the pretax expense would have been approximately $310 million, $450 million, and $620 million." "Year Ended June 30 1995 1996 1997 - -------------------------------------------------------------------- Pro forma net income $1,243 $1,902 $3,053 Pro forma earnings per share $ 0.99 $ 1.48 $ 2.32" 2) "The weighted average Black-Scholes value of options granted under the stock option plans during 1995, 1996, and 1997 was $10.46, $17.72, and $23.43. Value was estimated using an expected life of five years, no dividends, volatility of .30, and risk-free interest rates of 7.0%, 6.0%, and 6.5% in 1995, 1996, and 1997." 3) MSFT granted 55 million options in FY97 4) Assuming most of these options will vest (a pretty safe assumption, right?), MSFT should have charged almost $1,300 million in 1997. You see the fun of SFAS 123? mb