This is an interesting move.
Cisco Systems Inc. is seeking approval from the Securities and Exchange Commission to sell a new derivative that could reduce the hit to earnings when it begins expensing the value of certain employee stock options.
"It's no secret that we're trying to get a more accurate valuation," Cisco spokesman John Earnhardt told Bloomberg. "We have spent a lot of time on this issue and all we're trying to do is keep the option of using employee stock options." The company's goal is to have the market do the pricing, in the belief that investors will assign a lower value to the options than the value derived from models such as Black-Scholes.
Sounds a little suspicious, and I have to agree with Ron Fink that Cisco has better things to focus on.
It seems to me that Silicon Valley's time and efforts would be better spent on producing new technology instead of methods of limiting the impact of an accounting rule. After all, investors may simply ignore the hit to earnings and focus on cash flow instead. Or is that what really concerns the tech lobby?
It must be hell trying to cater to the whims of Wall Street analysts when you have a business to run.