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.

Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Sonny Bui who wrote (18062)	10/9/1998 10:12:00 PM
From: RetiredNow	Read Replies (2) \| Respond to of 77400

Hey Everyone and Chuzzlewit: I want to go back to a discussion we had earlier about the effect of stock options on a company's bottom line and so forth. First and foremost, here is a list of all options outstanding and their weighted average exercise price. From that we can calculate what the maximum liability Cisco would have IF all those shares were fully vested, which they are not. So this is a worst case scenario. Weighted Avg Current Person # of Options Exercise Price Stock Price Option Value Chambers 1,350,000 49.0833 50.0625 1,321,920 Listwin 412,500 46.7159 50.0625 1,380,473 Mazzola 300,000 46.9583 50.0625 931,260 Carter 337,500 42.9352 50.0625 2,405,464 Daichendt 300,000 46.9583 50.0625 931,260 Officers 3,300,000 47.3315 50.0625 9,012,300 Directors 195,000 36.6829 50.0625 2,609,022 Employees 58,887,690 36.3801 50.0625 805,724,930 -------------- Total Worst Case Liability 824,316,628 Now Cisco has $7 billion in cash, investments and A/R...more that enough to cover all of their obligations to employees. On top of that, the accounting treatment may not require a charge to earnings, as Chuzz pointed out, but they do require that outstanding options be used in the calculation of EPS, which results in an increase in weighted average shares outstanding and a DECREASE in EPS. They also require a disclosure of the accounting impact had the options been treated as compensation expense. So, I conclude that options are not a conspiracy against the working man, nor are they some trumped up ponzee scheme intended to enrich the rich and impoverish the middleclass and below. As everyone can clearly see from the table above. $805 million of the total $824 million worth of options have been granted to the 15,000 or so employees at Cisco (I've heard from friends that even secretaries get options). That is one hell of an incentive for the employees. Case closed.