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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 (3891)	12/16/1998 2:56:00 PM
From: Beltropolis Boy	Read Replies (1) \| Respond to of 4509

peoplesoft briefly mentioned at the end of this options repricing piece in the san jose mercury. (for the record, i've been following PSFT for a bit, but don't have a position.) ----- Posted at 9:24 p.m. PST Tuesday, December 15, 1998 Repricing stock options can be buy signal to investors BY ADAM LASHINSKY Mercury News Staff Writer Repricing stock options is a distasteful necessity guaranteed to enrage existing investors and delight employees. An assessment of a handful of technology-company repricings over the last year, however, reveals that the practice also is a potential "buy" signal to investors. That's because in numerous cases corporate managers -- panicked that they will lose employees unless they reprice options -- have proven adept at calling what's close to the bottom in their stocks. 3Com Corp. (Nasdaq, COMS), Oracle Corp. (Nasdaq, ORCL) and Netscape Communications Corp. (Nasdaq, NSCP) have repriced options in the last 12 months at rock-bottom prices. Shares in Netscape, for example, are worth more than twice their $16.81 value when Netscape repriced on Jan. 28. The shares of the Internet software maker, which is being acquired by America Online Inc. (NYSE, AOL) closed Tuesday at $39.81. When public companies reprice their stock options for employees, they're essentially changing what is supposed to be an incentive into an entitlement. They allow employees to lower the "strike price" at which they can convert options granted to them into shares of the company. It's good and fine to rail against the practice -- so good and fine that this column has hosted several such rants. But the moment of a repricing also potentially is a golden opportunity because it comes at a time when Wall Street is down on a company because of poor performance. And when the Wall Street herd mentality gets down on a stock, investors tend to overreact. "Whenever morale is at its lowest, the stock price can only go in one direction from there," says Silicon Valley business philosopher and CEO adviser Randy Komisar. That's assuming, of course, the company isn't seriously ill and that management doesn't make stupid decisions. One smart decision, despite the ensuing uproar, may be to reprice. "Given the way the valley economy works, I'm actually a big proponent of stock-option repricing," says Komisar, so long as top executives are excluded. The follow-the-repricing strategy worked out for investors who jumped aboard Oracle's stock when the database and applications software maker repriced a year ago at $22.88. Oracle's stock price has appreciated 73 percent since then. Similarly, shares of networking-equipment manufacturer 3Com are worth 47 percent more today than the $29.38 they were worth last Dec. 17, when management repriced options for the worker bees. The ultimate buy-the-dip approach also works with companies that haven't even regained their health, as Oracle, Netscape and 3Com -- to varying degrees -- arguably have. Adaptec Inc. (Nasdaq, ADPT), the adapter card maker, repriced its employee options on Oct. 21 at $12.50. Today those shares trade for $18.19, still far below Adaptec's 52-week high of more than $50. "It's something you don't want to have to do," says Adaptec founder and interim CEO Larry Boucher. "It was purely driven by both internal and external concerns over the loss of people." Boucher says that unlike in the past, institutional shareholders didn't flinch when Adaptec repriced because the investors already were concerned about the loss of key employees. Careful, though. Following Adaptec's repricings too carefully won't make investors money. The company also repriced in January -- at $22.31 per share. Finally, here's one data point to consider. Software maker PeopleSoft Inc. (Nasdaq, PSFT) announced Nov. 19 -- when its stock closed at $22 -- that it would reprice employee stock options currently valued over that price at the closing stock price on Dec. 15. That was Tuesday, and the stock closed at $17.31. Bottom anyone?