<<I read what you're writing, but I'd like you to do the equivalent analysis of MSFT for the last ten years and give us the results. You're barking up the wrong tree.>>
"Since fiscal 1990, Microsoft has repurchased 813 million common shares while 2.05 billion shares were issued under the Company's employee stock option and purchase plans. The market value of all outstanding stock options was $36 billion as of December 31, 2000."
While $36 Billion sounds like a lot, considering the revenue they generated since 1990 and earnings, it is not proportionally bad. They also repuchased about 1/4 of those shares, which shows up on the balance sheet, while RHAT just issues more stock.
Its hard to read the way it shows up, but in a nutshell MSFT made $.49/share last quarter, and the employee options drain away $.02/ share which is not reported except in footnotes. As opposed to RHAT which pro forma "made" $.01 eps last quarter, and the average employee options/warrants are ($.16)/share per quarter. One is a small fraction of the profits, and I don't think any long term MSFT shareholder begrudges the company rewarding its insiders, while the other is looting the shareholder equity establish by the IPO and secondary offering. Quite a difference.
I realize that this isn't a problem exclusive to RHAT, that many technology stocks have done this, and I would add that they are overvalued compared to a "plain vanilla" accounting scheme. It is one reason Warren Buffet stays away from technology stocks. I will look at MSFT, but I am not pro MSFT, I even shorted that this year, and made a couple of % gain. But the main difference I would expect to find is that MSFTs employee compensation is less than the value earnings have generated, or at least more proportional. Anything RHAT generated was due to stock offerings, and they valued the company at something like $.001 /share before the IPO to make the numbers not be required show up in the balance sheet. So even if the stock didn't go to $95 and have a secondary offering, just taking RHAT public was going to make these guy in charge of a losing business rich.