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July 14, 2003
Microsoft Hasn't Started a Trend, Yet

While it's been only a week since Microsoft Corp. announced it would stop offering stock options to employees, the Boston Globe reports that the move doesn't appear likely to start a trend.

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Most Boston-area technology companies contacted by the newspaper said they did not plan to change the way they compensated employees in the immediate future.

Options are still seen as an efficient and attractive means of rewarding achievement, especially among small technology companies, the Globe reports. These are the kind of companies that could see their stock prices rise dramatically.

Microsoft disclosed last week that it would cease to reward its 54,000 employees with stock options and instead grant employees shares of stock. Under the plan, the restricted shares will mature to full value over the course of five years. Unlike options, the grants will retain their value, even if Microsoft's stock price falls.

Compensation specialist Jack Dolmat-Connell told the Globe that the move makes sense for Microsoft, since the software maker is a mature company whose stock has proven relatively stable over the last few years.

Still, several larger technology companies said they won't be following suit. Software maker Oracle Corp. plans to continue its options program, as does Hewlett-Packard Co.

''If you believe, like I do at Oracle, that our stock can go up substantially, then options are still attractive,'' Larry Ellison, the company's chairman and chief executive, told analysts Tuesday. ''So what makes sense for Microsoft does not necessarily make sense for us.''

Oracle currently offers options to all its employees, and it has no plans to change the practice, said a spokeswoman, Deborah Lilienthal. Neither Oracle nor Hewlett-Packard will report options as expenses, spokeswomen for the two companies said.

Sycamore Networks Inc., the Chelmsford, Mass.-based maker of fiber-optics, has no immediate plans to abandon its stock options program - but eliminating the practice is a possibility, said spokeswoman Lucia Graziano. Each of the company's approximately 400 employees receives stock options, she said.


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