[Am-info] "Fool me once ..."
Sujal Shah
sujal@sujal.net
Wed, 09 Jul 2003 13:30:00 -0400
1. Stock options also dilute the stock when they are converted
2. Employees complained because the options were worthless and not any
sort of incentive at all
3. Restricted shares seem to be the choice here because otherwise MSFT
would have to register each issued share with the SEC. I don't really
understand much about how difficult that is, but options also have
similar restrictions. See these web sites:
http://www.flemingoneill.com/rule144.html
http://business.scu.edu/development/restricted_stock.htm
http://moneycentral.msn.com/taxes/glossary/glossary.asp?TermID=284
Yeah, an MSN URL, but google doesn't discriminate and it really is a
concise definition.
4. The accounting changes are not "spin" but widely called for by many
investors. Having options and stock based compensation accounted for in
earnings statements adds even more transparency to public companies.
Which is a good thing. It will "hurt" earnings, though, and Microsoft
is in a unique position to easily absorb that loss.
5. I've had options and have them at my current job. My most regards, I
would be considered a reasonably well paid software engineer. Boston,
where I live, is not exactly cheap (second highest home values behind
Silicon Valley). My rents in Boston have varied between 1400-1700/month
for a _one_ bedroom in town. Rents in general vary between about
1100-1800 for one bedrooms depending on quality and neighborhood.
My point: I understand what the Microsoft engineers are experiencing to
some degree. I also understand that they have little to complain about
from a pure compensation standpoint. I also wonder if any of them work
80 hours/week year round. I work with a former MSFT engineer who did
well with his options (he does stare longingly at Ferrari's that he
could probably afford).
Bottom line: they're not paupers. They're also not hurting that
badly. And, aside from several vague (incorrect) FUD you've put forth,
you've offered no concrete problems with this plan... This gives them
some cash for their otherwise worthless stock options and, in the
future, gives them real value instead of options. Keep in mind that
they're not paying for the stock in this case... so even if it's below
market value at the time of hire, who cares? They can still sell them
and get something, which is basically the best of both worlds. You get
real dollar value (unless Microsoft stock suddenly drops to 0) plus
incentive to make that share price higher.
The only concern here are tax issues, because they have to be careful
about the AMT applying because over time suddenly they will have stock
that has some value. Options are pretty much non-factors until you
exercise them.
Sujal
On Wed, 2003-07-09 at 13:07, John J. Urbaniak wrote:
> Sujal Shah wrote:
>
> > This seems like a decent plan, to be honest... they're helping current
> > employees with underwater options gain some money for those options.
> > The restricted shares are commonly given to executives... are you
> > arguing that executives are getting shafted in many companies across the
> > U.S.?
>
> No. Gates and Ballmer are not getting shafted.
>
> >
> >
> > Seriously, the restrictions are pretty basic. Also, they're expensing
> > them on their earnings, thereby making their earnings more transparent.
> > This is a good move all around from what I've read.
>
> Then you've read Microsoft spin.
>
> Issuing new stock will dilute all the stock that exists.
>
> This has three long-term effects:
>
> (1) it reduces the value of the stock because there are more shares
> outstanding,
> (2) it lowers the earnings-per-share value because there are more shares,
> (3) it lowers the earnings per share because the expenses increase to cover
> the stock paid to employees.
>
> These things have a long-term negative effect on the stock. So while the
> employees get their "restricted" stock at today's value, in the future the
> value will be reduced. Unless Microsoft shows significant growth.
>
> There has been nothing in the past three or so years to indicate that
> Microsoft will show any significant growth. Every part of Microsoft's
> business *loses* money with the exception of Windows and Office. None of
> their other adventures have worked out. They have all been losers. So
> where's the significant growth to come from?
>
> >
> >
> > Am I missing something here?
>
> You're missing the old wisdom: "Fool me once, shame on you ..."
>
> >
> >
> > I'm sure their employees are getting paid just fine
>
> Oh? This whole thing was a result of employee complaints. Somehow, they have
> to make the payments on their Ferarris and Porsches. Real estate in Seattle
> is ridiculous. Schools there are expensive ...
>
> > ... stock options in
> > a company like Microsoft are generally not about base compensation, but
> > about growth. They are incentives to perform well... I don't think
> > people plan on having the options worth something when they do their
> > budgeting.
>
> Really? Tell that to the guy with the $750,000 mortgage. Tell him after
> working his 80-hour week that he's not performing well.
>
> They didn't look at those monthly statements and see all those dollar signs
> which have now evaporated? They didn't think to themselves "Wow, I've got
> lots of money here? I'm a Microsoft employee and I'm rich?"
>
> Poof. It's all gone. And now we give you "restricted" stock?
>
>
> > I haven't, and my options at my current company are worth
> > money and almost always have been since I started working here.
>
> Yeah, but not Microsoft options. They're worthless. MS employees slaved 10,
> 12, 14, 16-hour days for years and ended up with nothing.
>
> Are Gates' and Ballmer's stock "Restricted?" No, they are not! Gates and
> Ballmer can sell their stock any time they want and get real money. It's been
> reported that Ballmer sold something like 70 million shares recently. Gates
> has sold his stock over the years to go from about 50% of the company to less
> than 20%. Gates and Ballmer ain't dumb. They knew when to cash in. No
> restrictions there.
>
> Gates and Ballmer took very good care of themselves. Their employees? Well,
> maybe they just don't matter. They won't mind a few "restrictions" on their
> compensation.
>
> John
>
>
>
>
> >
> >
> > Sujal
> >
> > On Wed, 2003-07-09 at 12:22, John J. Urbaniak wrote:
> > > Once again Microsoft is scamming its employees.
> > >
> > > For years, Gates paid Microsoft employees with Stock Options, which have
> > > turned out to be worthless. They worked and slaved for him and Ballmer
> > > and ended up with nothing. (But of course, Bill and Steve dumped lots
> > > of their stock and cashed in over the years.)
> > >
> > > Now he's trying to pay them with "Restricted" Stock.
> > >
> > > Restricted?
> > >
> > > If I were a Microsoft employee, with expensive mortgage, car, school,
> > > ... bills to pay, I'd tell Bill Gates where to shove his *restricted*
> > > stock.
> > >
> > > I'd say "Pay me with REAL MONEY! Money I can use to pay my bills. You
> > > got your money, Bill and Steve. I want mine. NOW!"
> > >
> > > As they say, "Fool me once, shame on you. Fool me twice, shame on me."
> > > I just wonder how stupid those Microsoft employees can be. Will they
> > > fall for this new scam on their livelihoods?
> > >
> > > Of course they will.
> > >
> > > John
> > >
> > >
> > >
> > >
> > >
> > >
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