Bill Gates...

[vc1111]

Microsoft has decided to give its employees stock instead of the " right to buy" stock, which is known as " stock options."

This company pays a measley 8 cents per share as a dividend to the the existing stockholders and now it will effectively water down those shares by handing out more shares to the employees from its so-called treasury stock which is usually only given to officers of the company.....

Is Billy nuts, cheap, or both?

[Big Country]

Hey, times are tough!
Everyone is pinching pennys!

[CalHunter]

Or crazy like a fox? He gives them the stock and they have to make it worth more to get something out of it. They now have even more incentive.

[Tazman]

vc TRW (now Nortrup Grumman) matched all of our stock savings plan contribution with TRW stock and it never hurt our stock prices, as CalHunter said, it gives you an incentive to do a better job when you own a piece of the pie.

[davidmil]

My son works for Bill Gates. The change from Stock Options to Stock directs was brought about to level the playing field a little for employees. As a company matures and the big explosions that happened early on become less pronounced. Also, with the decline in the market the past couple years, many employees who were given stock options find their options are in the negative through no fault of their own. Some people who were lured into to MS with options to offset larger salaries they could have gotten at other companies without options. They even are talking about the possibility of purchasing back some of these negative options from employees who find themselves in the negative. It' s simply a way to increase the salary without paying the up front funds. You can call it cheap, but it also gives the employees an insentive to work hard and increase stock value.

Under the old Option plans they couldn' t do anything with them for 4 years and had to exercise their options within 7 years. That gives them a 3 year window to do something or get off the pot. With the crumble in the market as long as it' s been many people find the options did nothing. Bill is trying to insure it doesn' t happen again and to show the emplyees he cares about their success. When he gave them the initial options he honestly hoped they would reap some benefit from them.

There is no such thing as an hourly employee at MS. Those folks crunch some kind of hours. They have deadlines and do whatever it takes. My son has gone a 3 day stretch where he never came home. He' d catch a couple winks here and there on his couch but was working non stop at the deadline for a release. I' ve gotten lots of emails and notes from him well into the night or early AM saying " just checking in. Hope you' re well. Got to run. Work calls" .

Bill is trying to compete for the smartest and brightest as best he can. The place is like no other to work in.' How can anyone suggest Bill is being cheap. The man and his wife have donated more money to more things than the heads of all the major top 500 companies together. Anyone who bought his stock in the early 90s or late 80s has no room to gripe about dividends. They' ve made millions. Some companies give dividends, some don' t. The stock market is NOT a guarantee... it' s a gamble. Anyone who invest in it knows it or shouldn' t be playing in it. You want big dividends guaranteed.... buy a stock that gives them. You want to gamble on the big hit, you take your chances and hope Bill hits it big time on another WINDOWS product.

My son could go somewhere tomorrow and make 10s of thousands more than he is guaranteed now and work less. He knows that but believes in MS, Bill and the company employees. At the same time he' s running everyother weekend cross country to get an MBA at one of the top business schools for two years.... at his own expense. Why?.... because he' s covering himself and making himself more marketable if he needs to be. He still does his job. It' s funny in that he has 8 people from IBM in his class who are ALL getting a free ride on their MBA from IBM. If I were a stock holder that would upset me more than Bill' s move. Right now they' re crunching for a deadline at MS.. The two bosses above my son have been or will be away for almost a month. He doesn' t bitch about the extra work load... he just does it like the rest of the employees... because they believe. Bill is showing his appreciation and taking care of business with this move.

You don' t like Bills move, don' t buy his stock.[:-]

[fng]

Cheap.

He' s essentially handing them nothing.

[vc1111]

Anyone who bought his stock in the early 90s or late 80s has no room to gripe about dividends. They' ve made millions. Some companies give dividends, some don' t. The stock market is NOT a guarantee... it' s a gamble. Anyone who invest in it knows it or shouldn' t be playing in it. You want big dividends guaranteed.... buy a stock that gives them. You want to gamble on the big hit, you take your chances and hope Bill hits it big time on another WINDOWS product

Your son sounds like a fine hard-working man. You should be very proud.

However, you are wrong about the situation with microsoft.

Fledgling companies go through a very standard life-cycle....all of them. Microsoft is no different. As a rule, only relatively new growth-oriented companies " don' t pay dividends." The company has matured, it is showing huge profits. Much if not most, of that money is currently held in cash, NOT being reinvested in research and development to such a high degree as to preclude all dividend payments, as is the case with newer growth-oriented companies. Microsofts numbers (on an earning-per-share basis), which I will not bore you with, reveal that the company is in a position to pay much more substantial dividends. They are in the phase of their life-cycle where it would not only be possible, it would be most appropriate. That is how the word " cheap" was introduced into this topic. Other companies in their life-cycle stage and position begin to pay substantial dividends.

Your premise is that they are simply not a dividend-paying company, and that premise is wrong.

Any company with excess profits is obligated to send those profits to the shareholders, first and foremost. The employees are always second in line to the owners of the company, the shareholders. To distribute treasury stock (outside of an ESOP), to rank-and-file employees is not only practically unheard of, it is questionable business practice, in my opinion....especially from the perspective of millions of ordinary non-employee shareholders. If they have that much excess cash, it would be more prudent to engage in a stock repurchase program, which would not only NOT water down the current values, it would actually increase the value of outstanding shares, thereby making the existing stock option plan for employees more attractive and viable. This, in my opinion, is a giveaway of company profits to employees instead of shareholders, plain and simple.

The stock options that were issued have the same effect of motiviation for employees. If the company prospers, shows profit and distributes those profits appropriately, the company stock increases in demand and the values go up.

If you own " Bill' s stock" and most folks do directly or indirectly, this was done to favor employees at your expense.

If my son worked there, perhaps I too would have some difficulty in viewing the situation from a distant clear perspective.

[TxCowboy]

Ok, all that just went over my head.lol

[davidmil]

If you own " Bill' s stock" and most folks do directly or indirectly, this was done to favor employees at your expense.

YUP, I believe that' s what I said. It was done to give some balance to the employees who came into the company at a bad time. It was done to retain the high quality talent pool he' s acquired. Without them the company would be hurt. They ARE spending mega money on research. Retained earnings have always been around in business. Excessive retained earnings would be jumped all over by the IRS. They' re within guidelines.

[vc1111]

While it is admirable for any CEO to reward his employees, there is still a proper chain of command to salute. As I stated, for a company with overflowing coffers to pay peanuts as a dividend and then turn around and roll out a stock give-away, which has the effect of watering down the values of existing shares, is highly questionable.

There is a huge difference between " excessive" earnings and " excess" earnings. Day and night as a matter of fact.

For the stockholders it is all the difference in the world.

Microsoft is no longer a newbie company. It currently has nearly 43 BILLION dollars in cash and short term investments. Common sense dictates that any of these excess profits (meaning that they are NOT earmarked for R&D...and yes I am well aware that they spend on R&D as do most larger and older firms as well as the younger ones) go first to the shareholders that financed their generation.

Meanwhile, the company will expense the previously issued stock options...again at the expense of all share holders.

Want proof?

From Forbes:

Under the Financial Accounting Standards Board rule 123, Microsoft has detailed what the effect of expensing options would have been on its earnings. In 2002, Microsoft, which then had 5.4 billion shares outstanding, reported net income of $7.8 billion or $1.41 per share, assuming full dilution. That number ducks to $5.4 billion or 98 cents per share under 123.

A drop in earnings-per-share of nearly 1/3...hardly something to sneeze at....and that' s before the new shares are issued to employees...which will effectively reduce the value of existing shares.

Let' s hope the shareholders will sleep better knowing the employees are well-compensated.