Table: How Options Skew the Bottom Line...And Lower Taxes

Some argue that issuing options artificially boosts earnings because companies do not have to account for them as an expense. At the same time, options provide huge corporate tax deductions.

EARNINGS REDUCTION IF OPTIONS HAD BEEN EXPENSED 1996-2000*

AOL TIME WARNER ** 75% VIACOM 66 NVIDIA 40 BAKER HUGHES 35 MEDIMMUNE 31 LUCENT 30 PHARMACIA 28 CISCO SYSTEMS 26 BOISE CASCADE 17 BLACK & DECKER 14

AMOUNT OF TAX BENEFIT IN 2000 (millions)

MICROSOFT $2,066 CISCO 1,397 LUCENT 1,064 DELL 929 INTEL 887 AOL TIME WARNER 711 MERCK 538 SPRINT 424 ENRON 390 APPLIED MATERIALS 387

* Based on cumulative earnings, after special charges ** Excludes options for Time Warner, which was acquired by AOL in Jan. 2001

Data: Jack Ciesielski, R.G. Associates Inc., Jane Adams and Alain Pelanne at Credit Suisse First Boston

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