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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Engel who wrote (67176)	10/22/1998 1:56:00 PM
From: JDN	Read Replies (1) \| Respond to of 186894

Dear Paul: You are expousing the Company "story". Wonder why it isnt working in many cases?? JDN

To: Paul Engel who wrote (67176)	10/22/1998 2:33:00 PM
From: Doug M.	Read Replies (2) \| Respond to of 186894

Paul (and all others), thanks for your explanation. However, my main question is the difference between the exercise and the sale of the options, and the subsequent tax consequences. My understanding is that if you exercise the options you pay the strike price which I'm sure is quite low multiplied by the number of shares - in this case it's 700,000. Any profit you have at that point is the difference between the market price of the stock and the strike. I believe that if the options are qualified you're not taxed on anything until you sell the shares - hopefully many years in the future. In this case you're only taxed on long term capital gains - which is a lot better than ordinary income. However, in Barrett's case we've been told that he's actually selling all the shares on the open market. This leads me to believe that he has exercised the options at the strike (say it's 20 bucks for arguments sake) and is applying for an immediate sale - say at 86.5. If the options are NON qualified, then his tax liability must be paid in the current year even if he didn't sell the shares in the open market. These taxes would be paid at ordinary income levels (not at the long term capital gains rate) - this would be a huge tax burden. It doesn't matter if he decided to hold the shares for the long haul or not. He would have to get the money from somewhere to pay the taxes so he would be forced to sell at least one third of the shares to meet tax obligations. The second scenario would make me feel a lot more comfortable. I would accept the fact that Barrett had to sell so many shares to meet tax liabilities. In the first scenario the only money he would have to come up with would be 700,000 times the strike price of the options - he would have no tax liability until he decided to sell - hopefully years from now. In the second case the amount of shares he could keep (after accounting for taxes) could be replaced within a few years with new options granted. In the past three years Barrett has received ON AVERAGE 95,000 options per year. I don't know the strike price but the quantity is in the proxy statement. Executives like Ottellini received a lot more. Just last year Ottellini was granted options for 232,000 shares. Maybe this is Intel's way of giving the younger guys more incentive for the future - since they are the long term future of Intel. Anyway, I'm concerned with Barrett's reign since he has the biggest impact on the future of the company. Barrett is arguably better than Grove and Intel may never see another Barrett. If the first case scenario is true and the options are qualified, I would like to know what Barrett thinks is a better use of his money than in a company that he directly controls. If he has identified a better investment for his funds, I would like to know about it - maybe I should invest in the same thing. We all have opportunity costs, and I choose to hang on to Intel for the long haul. If Barrett's shares were qualified, selling one third of your holdings (700,000/2,100,000)is not a good indicator of the long term confidence in the "destiny of Intel". I'm just a concerned Intel investor who is looking for some concrete answers. All replies will be appreciated. Rerards, Doug

To: Paul Engel who wrote (67176)	10/22/1998 3:55:00 PM
From: rudedog	Read Replies (1) \| Respond to of 186894

Paul - There are other issues WRT options. Given that the employee could exercise the options any time after vesting, holding them to expiration is a strong statement of faith in the company. Another key point is that someone who has been with a company for a long time and has had his or her contribution recognized by option grants over the years may have a disproportionate amount of net worth tied up in the company's stock, and a little prudent diversification is only sensible. Like Freud said - 'sometimes a cigar is only a cigar'. Sometimes a stock sale is just a part of general financial planning and not a statement about anything else.