I’ve a few minutes before the next scheduled meeting. That’s only because
the meeting scheduled for right now has been cancelled. My boss Bruce
just came by a few minutes ago to let me know that I’ve been granted
a sizeable set of LSI Logic stock options. This grant is 7,500 shares at a
strike price of $12.80 per share. The grant vests at a rate of 25% per year.
That means, next year on May 1st, 1,875 of these share will be available for
me to exercise. I have ten years from now to exercise the options. What that
means is that I can do a “same-day transaction” of buying up to the vested
number of shares at $12.80 apiece, and then sell them for whatever the
market price is. The gain is then taxed as ordinary income.

For instance, five years from now I decide to exercise all 7,500 shares of
stock options and the market price is $25.00. I would have a net gain of
$91,500 (7,500*25.00 – 7,500*12.80). After taxes and stuff, that would
result in about $40,000 in my pocket. Obviously, if the stock price were to
be much higher by then, this would be an even more valuable transaction. On
the other hand, if the market price is below $12.80, then the options have
no value at all.

The purpose of stock options is to provide incentive to the employee to stay
with the company and help the stock price to increase. These 7,500 shares of
options along with the options I’ve been given previously, make up a
significant portion of our retirement money. Here’s what’s available to me
right now:

9,000 shares at a strike price of $11.188
4,000 shares at a strike price of $20.938
4,000 shares at a strike price of $12.50
4,500 shares at a strike price of $18.50
4,000 shares at a strike price of $55.50
6,000 shares at a strike price of $21.34

If the stock price got to $60 and I exercised the entire shebang — it would
result in a gain of $1,771,226 of which about half would end up in my
pocket, definitely enough to retire on. On the other hand, if the stock
price were to only get to $30 a share, then the net gain falls to just over
$500,000 and that’s not enough to retire on!!

It has been cold here this week, once again (I’m in California…). It
rained on Monday and Tuesday, but they say the rain is over for the week.
Last night one of my managers in Colorado, Porter Harrison, arrived for some
meetings today and tomorrow. We went to a little Japanese restaurant for
dinner and he got his first real taste of Japanese food. I sure enjoyed my
fare … it appears that he did as well.

Bruce’s staff meeting is in a little while. That will take the rest of the
afternoon. We’ve a dinner tonight celebrating our recent renegotiation on
the North American Wide Area Network. I’ll be well fed today….

This entry was transferred from an older journaling system on 29 November 2002.