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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Richard Nehrboss who wrote (44456)	1/24/1999 12:13:00 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

Richard, I think MSFT is ahead of most at using options to compensate employees, so I would suspect Nasdaq as a whole would have somewhat lower impact. MB

To: Richard Nehrboss who wrote (44456)	1/25/1999 2:35:00 AM
From: Peter Singleton	Respond to of 132070

Richard, I'm not the guy to respond on this, but I'll take a stab at this anyway ... hoping someone more versed can chime in. MSFT took an interesting take in the notes in their financial statement: what if they were to price their employee stock options as if they were call options using Black-Scholes, then expense those as compensation expense ... what would the effect be on their earnings (and they've factored in the cash hit overtime, hence reduced interest income, etc.). I think that's where you come up with the 8% number for P/E understatement (I didn't check your #, I assume it's correct). While this appears technically sound, it seems to significantly underestimate the impact of the company's options vs their earnings, as the links wmmagner has posted ... I think one of his links showed the aggregate in-the-money value of unexercised MSFT ESOP options was greater than the total revenues of MSFT throughout the company's history. I think this is an issue of what snapshot you take of the problem ... if you look at it one way, no big deal, another way, it's real big. It depends on what data you choose to highlight. Peter