Enrique Diaz-Alvarez enrique at anise.ee.cornell.edu
Fri Mar 10 13:02:51 PST 2000

Jordan Hayes wrote:

> From enrique at anise.ee.cornell.edu Fri Mar 10 12:00:27 2000
> There is a good reason why no tech companies, not even
> mature, nominally profitable ones, pay significant dividends
> - they just don't have the free cash flow.
> Tell that to Microsoft ($17.8B), Intel ($11.5B), Cisco ($4B) ...

Yep. And they spend nearly all of it in stock buybacks which, curiously enough, never actually decrease outstanding shares.

And I think that, with Dell, that about covers significant cash flow in the NASDAQ.

> If stock options were expensed using, say, the Black Scholes
> model, the NASDAQ would collectively report an enormous
> loss, year after year.
> That's a silly proposition: if they were expensed, they wouldn't
> be so plentiful.

Yeah. Kind of, like, if Amazon wasn't losing so much money, it would be making a profit, eh?

To paraphrase Buffet, if stock options are not compensation, what are they? If compensation is not an expense, what is it?

> I think it's more useful to see stock options as an outsourcing of
> compensation to the company's shareholders directly rather than
> washing it through the annual report :-)

Cute, but what about the main point, i.e., can tech companies actually put any cash in shareholders' pocket until their stocks decline significantly and void all those options?

-- Enrique Diaz-Alvarez Office # (607) 255 5034 Electrical Engineering Home # (607) 272 4808 112 Phillips Hall Fax # (607) 255 4565 Cornell University mailto:enrique at ee.cornell.edu Ithaca, NY 14853 http://peta.ee.cornell.edu/~enrique

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