Dell Computer now Dell to pay more cash than options
Dell Computer (soon to be renamed just Dell as it branches out into all kinds of other technology industries) will be awarding more cash bonuses this year as compared to stock options in response to the growing outcry against the usual policy of companies not expensing stock options according to this earlier Wall Street Journal story (subscription required):
As at many technology companies, stock options have been an extremely popular form of compensation at Dell, creating a class of wealthy employees dubbed "Dellionaires." But the Round Rock, Texas, computer maker has been a vocal opponent of expensing stock options, and has said it plans to halve the total number of employee options issued this year compared with last year.
...In the past, Dell's granting of stock options to employees significantly expanded the company's cash flow and reduced its taxes. UBS Warburg LLC has estimated the company saved as much as $1 billion in annual taxes during the late 1990s by deducting from corporate income taxes the exercise of stock options by employees. When employees exercised the options and paid for the shares, the payments also increased Dell's cash flow.
Expensing options when they are granted would hit Dell's bottom line hard. If Dell had expensed options for its last fiscal year, its earnings would have fallen by a third, to $1.4 billion from $2.1 billion.