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.

Strategies & Market Trends : Good Investment Theses: VALUATIONS w/ FUNDAMENTAL ANALYSIS -- Ignore unavailable to you. Want to Upgrade?

To: The Philosopher who wrote (77)	4/24/1999 7:05:00 PM
From: Edwarda	Read Replies (1) \| Respond to of 160

A very worthwhile contribution, Chris, and I thank you for it. I agree that options are less precious in keeping people at a company such MSFT, although it has enabled the company to pay lower salaries to get people to work those crazy hours. (They also, as you know, have a habit of hiring "consultants" to work crazy hours without paying benefits or incurring a good bit of administrative cost, thereby lowering the "total cost of ownership" of the bodies.) As I am sure is obvious, Chuzz and I have taken rather extreme positions and appreciate a dose of reality. BTW, why should you blush? A note of levity on this thread should be welcome as long as the information is substantive. What's happening here is far more to the point than a good deal of the name calling and jeering that goes on elsewhere. At least, we are being complimentary. [And after some of what you posted elsewhere.... ;-)]

To: The Philosopher who wrote (77)	4/24/1999 7:24:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 160

Chris, let me answer your points one at a time: it's all very fine, Chuzzlewit, to talk about paying everybody in cash, but in the early days we didn't have any cash ... I grudgingly conceded that point to Edwarda. But I shifted the argument to companies that are flush with cash -- outfits like MSFT. WHY do you feel a need to include options in the face of the financial statements IF they are fully disclosed elsewhere, as they must be to get an auditor's okay? I don't consider that full disclosure. What we get is a listing of options, the exercise price and the time period for vesting. We also get fully diluted earnings which takes into account the additional number of shares (the denominator of eps) What we don't get is the cost. And most of all, what we don't get is the cost on the income statement. So we never see the effect on the numerator. That's not what I call full disclosure. If you read the Gretchen Morgenson piece that I used to kick this discussion off, you will see that several accounting firms are having a great deal of difficulty figuring out just how much these options actually cost shareholders. In addition, there is the problem that you tend to reward the useless as well as the valuable Yes, this was a problem I intended to bring up later. The objection is that you reward people based on the performance of the stock, rather than their individual, measurable contributions against individual goals. TTFN, CTC