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

To: Michael Bakunin who wrote (51498)	3/11/1999 6:04:00 PM
From: Michael Bakunin	Read Replies (1) \| Respond to of 132070

If Microsoft wanted to "err on the side of conservativism", they'd account for options, as FASB encourages but doesn't require. That they choose not to speaks volumes. Volatility directly affects the model; again, please check stuart.iit.edu as a good overview. In '98 MSFT granted 69 million options with wtd avg exercise $62.56, for which they calculated wtd avg Black-Scholes value $23.62, a total of $1.6 billion. Upping vol to 45% bumps that to $2.1 billion. You probably don't expense at once, but that's a lot -- period. Where did you get the idea that this decreases shares outstanding? It is by diluting existing shareholders that these "free" options exact their cost. There is a tax benefit, to be sure, but if that motivated MSFT, shouldn't they adopt SFAS 123 to further reduce their bill? mb