Its not just Macquarie - its Cisco, Nortel, Lucent, Ariba,...

Its not just Macquarie - its Cisco, Nortel, Lucent, Ariba, Sebel, Avaya, pick any of these companies and you will find that anyone who joined in the last 4 years will have worthless options. They now have to work their guts out to cover the territory because of the retrenchments and there is no additional reward - mind you they still get well paid.

The companies also did their best to second guess the economic climate and handed out more options to appease the troops - and guess what? No recovery, more hard times, so all the new options are still under water as well.

Cisco still has a P/E ratio of something like 42 at around $11 per share with most people agreeing that anything over 25 in these times is way to high. I think the long term outlook for Cisco share price was around $17 so not much leverage from options anyway.

The interesting part of this is that for all the philanthropic messages that come down from the Exec teams, like mind your own business, contribute to margin, stay focussed, look ahead to the long term, be more aggressive (which the customers hate) etc etc the execs knew to the day when things slowed down and they managed to get most of their options away.

How do I know - because I watched as the country manager for one of these companies stood on stage and declared that everything was fine and he would not advise anyone to sell their stock.

From an economic point of view I can also tell you that things are not too healthy in the IT industry as a whole - forward sales for many years have been pillaged by the Y2K excuse, most people are now connected to the internet, so the underlying infrastructure is in and most of the large corporate networks have been well & truly built. Nothing new coming for a while and no new revolutions in communications to use as an excuse to completely revamp. Many businesses are telling us that they have a freeze on spending for six months.

Regards
Gumnut