Replies to post #61657 on Intel Corp (INTC)

[The Duke of URL]

The better questions are what are the terms of the stock bonus plan (s), who gets how much, not just the top executes but all who receive stock bonuses.

The terms would include, what the bonuses are awarded for, i.e. for benchmark goals to improve what is in the realm of the employee to affect, are they issued at a discount to the present market value, what is the vesting period.

I must admit that most of this is not fully disclosed in the quarterly and yearly reports, or if it is it is pretty well buried.

The first and foremost issue is disclosure.

It is to be noted that stock options issued are not counted as outstanding stock unless they are "in the money" or likely to be exercised, so there could be billions more options, that will not get shown until say the stock gets to 30.

These are the questions.

[wbmw]

Re: There does seem an imbalance between rewarding mgt (for not great stock appreciation) and rewarding shareholders with dividends

I hope you and ProfMD will decide to do some due diligence on this at some point. Reading the 10-K might help.

http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=5743281-856-530294&type=sect&dcn=0000891618-08-000106

Particularly, you can take a look at the number of outstanding shares and new grants over the past several years.

                                                          Weighted     Aggregate  
                                           Number of        Average     Intrinsic  
 (In Millions, Except Per Share Amounts)     Shares     Exercise Price     Value    
   
 December 25, 2004                            883.9        $  26.26            
   
 Grants                                       118.9        $  23.36            
 Exercises                                    (64.5  )     $  12.65            
 Cancellations and forfeitures                (38.4  )     $  29.80            
 December 31, 2005                            899.9        $  26.71            
   
 Grants                                        52.3        $  20.04            
 Exercises                                    (47.3  )     $  12.83     $  364   
 Cancellations and forfeitures                (65.4  )     $  28.07            
 December 30, 2006                            839.5        $  26.98            
   
 Grants                                        24.6        $  22.63            
 Exercises                                   (132.8  )     $  19.78     $  552   
 Cancellations and forfeitures                (65.4  )     $  31.97            
 December 29, 2007                            665.9        $  27.76            
                                    
 Options exercisable at:                                 
 December 31, 2005                            469.2        $  29.16            
 December 30, 2006                            567.6        $  28.66            
 December 29, 2007                            528.2        $  29.04           

So, basically, the reason you don't see the share buybacks reducing the total number of shares is because last year there was a larger than usual number of people exercising options. Not just management, but also employees, most likely.

Should you be surprised? Hardly. The stock just about reached $28. Of course, a lot of employees exercised old options before they expired.

Intel has actually been reducing new options grants substantially in the last several years. Your theory of management rewards does not fit the data.

Also note that there continues to be 665.9M shares worth of outstanding options remaining. If you look further down in the 10-K, you can see that 142.6M have strike prices above $30, so they are the most likely to expire worthless. However, you can expect a bloat of about half a billion shares over the next several years, especially if the share price continues to incline.

Intel's share buyback prevents this from being directly dilutive, and thus passes on value to the shareholders. At some point, if they continue to grant fewer options and buy back more stock, they will eventually get through this next half billion shares, and be able to have stock buybacks go directly towards reducing the current outstanding base.

You can find all these tables on page 63 of the 10-K document listed.

[Sarmad]

>> At what point do you think outstanding shares will actually decrease?

Share count has decreased. The report shows "average share count". So in a quarter when end-of-q count is 120m shares less than start-of-q, the average will be only 60m less. Next q the full reduction will show up.

When per quarter buy-back is constant, this delay due to averaging does not matter. In a quarter when the quantity is very different, then it results in an apparent discrepancy that is not actually there.