[Am-info] "Fool me once ..."
Sujal Shah
sujal@sujal.net
Wed, 9 Jul 2003 18:38:19 -0400
John, once again you decide to put hate above reason... it's difficult
to argue with you on this as a result. First, let's deal with the
misconceptions in your response:
A. The issue you seem to be sidestepping is that Microsoft isn't the
only company to use options to entice, retain, and reward employees.
Most of those companies are in the same situation today as Microsoft...
options granted during the boom are below water today.
By trying to single out Microsoft for common behavior, you're just
being unreasonable. They aren't the only company to use options. They
aren't the only company where principals in the company use their stock
holdings to subsidize their income.
B. The issue that you pointed out with stock options ("when they are
converted") is precisely the reason that people want options accounted
for... it's that dilution in some unknown future that represents a
liability to the company. Why? Because it is possible for every
employee to exercise their vested options all at once.
C. The concept of options is not "worthless." My options at my current
company are all above water and returning well over 20%.
D. The investment community is unhappy because this move will impact
Microsoft's bottom line... by some accounts up to $2.76 billion for the
fiscal year ending June 2002 (they are going back and restating
earnings for 3 years). Also the market was down today in general... I
don't know if much can be deduced from a .83% drop in one day.
E. Finally, another of your misconceptions.... employees want options
or equity based compensation because it can grow faster than your
salary, faster than bonuses, etc. Also, it encourages long term
employment with a company because the options or actual shares in this
case vest over time. It's a gamble and many people choose to take it.
Some don't. It's not like you're forced to take options...
Now, as for your posts being FUD, you're not backing up ANYTHING you've
said with facts. I'm willing to be wrong on this if you can show me
how. For example, if you can answer these questions:
1) how has Microsoft acted irresponsibly with options?
2) how has that behavior been different from Intel, Cisco, Oracle, etc.?
3) When you claim Balmer and Gates are "dumping" stock, how much have
they sold in terms of the total they own? How much in terms of the
total number of shares outstanding for MSFT? They have 10,736,261,000
shares outstanding.
4) What is Microsoft's current raise and bonus policy? I believe
standard raises and bonuses are still in effect... they're not in any
sort of raise and bonus freeze there... the equity compensation is on
top of that compensation. But, again, I could be wrong... do you have
any specific information that the raise and bonus policy has changed?
Sujal
On Wednesday, July 9, 2003, at 05:47 PM, John J. Urbaniak wrote:
>
>
> Sujal Shah wrote:
>
>> 1. Stock options also dilute the stock when they are converted
>
> That's the point - "when they are converted." Microsoft was very
> shifty in their
> extensive use of options. They knew that all the employees wouldn't
> convert their
> options at the same time. Thus they were able to pull the wool over
> the eyes of the
> other MSFT stockholders and the employees as well. Now that the
> options are
> worthless and the scheme is exposed, they bring out another scheme -
> this
> "restricted" stock scheme.
>
> MSFT was down today. Perhaps the investment community isn't as
> enthusiastic about
> this scheme as you seem to be.
>
> Any smart MS employee would have cashed in his options as soon as he
> saw Gates and
> Ballmer dumping their own stock.
>
>>
>> 2. Employees complained because the options were worthless and not any
>> sort of incentive at all
>
> Of course, but my reply is "Fool me once, ..."
>
>>
>> 3. Restricted shares seem to be the choice here because otherwise MSFT
>> would have to register each issued share with the SEC.
>
> Again a ruse to avoid exposing the truth. MS has been good at that.
>
> But if Gates and Ballmer are dumping their stock, why in the hell
> would any employee
> want to hold his? Why would any employee accept stock (paper) instead
> of real
> money?
>
>> 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.
>
> Yes, it will hurt earnings, which means the stock goes down, which
> means that the
> employees get screwed once again. Instead of paying REAL MONEY, Gates
> gives them
> paper again. "Fool me once ..."
>
>>
>>
>> 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.
>
> Again, some companies act responsibly with regard to options.
> Microsoft has not.
> That's why they are worthless today.
>
>>
>>
>> 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).
>
> He did well if he sold them when Gates and Ballmer dumped their
> holdings. But
> remember, Ballmer dumped a big load a few weeks ago.
>
>>
>>
>> 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.
>
> Well then, why in the hell doesn't Microsoft just PAY THEM? A bonus,
> a raise? Why
> go around the bush with this "restricted" stock scheme?
>
> The obvious answer is "Fool me once, ..."
>
>> 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.
>
> I say that the honest thing to do would be to give them the money. If
> they want
> MSFT stock, they can buy it themselves.
>
> It's not FUD. It's the truth. Instead of paying its employees with
> real money, it
> gives them paper and promises. In time, the paper becomes worthless
> and the
> promises fade away. That's what happened with the options. That's
> the real FUD.
>
>>
>>
>> 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.
>
> True. Microsoft wants to avoid such things as FICA on salaries, so it
> gives them
> paper instead. It dumps the burden of taxes off on the employees.
> Again, the
> employees get screwed. Gates is good at screwing his employees. And
> they seem to
> like it?
>
> John
>
>
>>
>>
>> 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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>>>> --
>>>> ---- Sujal Shah --- sujal@sujal.net ---
>>>>
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