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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (2137)	9/4/1998 12:07:00 AM
From: Chuzzlewit	Read Replies (2) \| Respond to of 4509

Mindmeld, dilution must occur. Let me explain: The only way to avoid the appearance of dilution is to repurchase stock. Perhaps you can hedge by selling puts, but the fact of the matter remains that stock is sold to insiders at a price that is less than market. If you assumed that the stock was not issued, but the company had still sold puts and had repurchased stock there would be a net decrease in the number of shares o/s. Second, since the cost of issuing the option is not an income statement item, the numerator in eps is a fiction. So to talk in terms of eps without giving weight to off statement expenses is questionable. Third, the accounting is important to us as shareholders. There is too much in the way of smoke and mirrors in this game. And if you are rewarding employees on performance, the cost of labor ought to be explicitly stated. Dell is very adept at playing this game. Nevertheless, costs are high and go unrecognized by standard accounting and by many investors. I once tried to figure out what that cost was for Dell, and finally gave up. It was much too complex and I had insufficient data. We've come a long way from PSFT, when I suggested to the thread that the reason for the cc was to jawbone the price of the stock up so as to support employee options. So far I haven't heard anything that persuades me that this suggestion is incorrect. There is another excellent resource on this issue. The New York Times print edition had a major article on this about six months ago. If you are interested in pursuing stock options it might be worth your while tracking it down. TTFN, CTC