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Technology Stocks : Wind River going up, up, up! -- Ignore unavailable to you. Want to Upgrade?

To: Goodboy who wrote (3434)	7/20/1998 3:08:00 PM
From: Joe Smith	Respond to of 10309

We are looking at the accumulation of stock options over a multi-year period in the past. Do we even know that this reflects current policy? One poster said that options are great for an embryonic company. WIND is no longer embryonic, we know that. But, do they have the same policies that they did in earlier embryonic years or have these policies been altered? We are definitely dealing with rear-view mirror numbers here. What is up ahead? Also from the rear-view mirror... the generous return in WIND stock options is directly proportional to a generous return for stockholders who actually invested money in the company. We all got invitations to this party and it seems that the party was quite successful, so looking in the rearview mirror, it seems that the policy was good. But what about people who are getting in today? Certainly anyway who bought stock in the mid-30's during the last couple of years must be disappointed. This might cause a case of low-price envy. Many employees got into WIND by investing their futures while the stock was at a historically low price. They are being richly rewarded whether or not they had anything to do with WIND's success. The main difference between these employees and early investors is that the employees will continue to be rewarded for a couple more years if they have the loyalty to stay on. (This is known as golden-handcuffs. There are many benefits to the stability that this creates. Without it the business world would probably act just like the sports world and you could never build a franchise of superstars with any confidence in the future.) Many employees, just like many investors got on the bus a little late to take of advantage of 1996. They also are making little or nothing on the stock. If the stock outperforms again, then their investments will outperform. If not then their pay will only be moderate. I for one am glad that WIND shares our good fortune with its employees. Perhaps I am just a bit old-fashioned martyring my hard-earned dollars to their cause. Certainly employee compensation is a big expense and we know that WIND management tied employee compensation to the stock price of the company. That proved costly because those employeees as a whole were able to create something that Wall St. investors put a high value on. The same goes true for pre-1996 investors. Those who had the foresight or the luck to get in early were richly rewarded. Enough of history...What does this say about the future though? Michael's answer was a breath of fresh air. Let's look at some possible future scenarios. This seems much more interesting than comparing the Stock-option size of a list of CFO's that we know little about. We don't even know if they have comparable job descriptions. With WIND's fast growth, will this early generosity mean very much a few years down the line when the options are cashed in? Do the repurchase numbers put a significant dent in equity? Will they in the future? Is WIND still as generous now as they were? Is WIND managing its option grants well in comparison to other companies that are competing for our investment dollar? Did they make mistakes in the past that others did not that will come back to haunt us? With evidence like that Microsoft article, clearly this is an important issue to this whole sector. Looked at from a certain perspective, stock options look like a debt that can never be repaid. Is Microsoft really bankrupt on stock options. OR is this perspective missing something? Let's not just ramble on trying to score points for the Long team or the Short team. I don't think that this is a game. My family's future is at stake when I am investing.