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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Dale J. who wrote (34605)	7/18/1998 11:24:00 AM
From: milan0	Read Replies (1) \| Respond to of 1571405

Dale Re: Stock options "FASB should require it [stock options] show up as an expense, that would in turn hurt the stock price and shareholders would then in turn put a stop to it, or at least curtail it to a reasonable level and based on performance." I agree with you that stock options should be based on performance. I believe that the right recipe has not been widely applied. Stock options don't create problems when the stock price goes up: then, both employees (with options) and shareholders are happy. But, if the share price goes down (or goes nowhere), shareholders feel ripped by employees that can exercice at lower prices. Remember when Jerry S. had his options repriced? I should add that options don't have to be an expense to hurt the stock price. First, when shares are issued/exercised, there is dilution. Then earning per share decreases by the simple fact that the number of shares increases. Secondly, if the company repurchases issued shares to prevent dilution, both cash and shareholders' equity decrease. That was my point when I wrote that Intel's cash balance had been reduced by almost 3B$ since the beginning of 98. Usually, shareholders don't mind stock repurchases to prevent dilution. However, there is a limit to the amount of cash transferred from shareholders to employees with stock options. Even Intel will soon find that limit if earnings don't improve and the shares have to be repurchased at a much higher price than they were issued. Hope this helps Mike