Intel Won't Give Up the Options Habit

Revenue grew a mere 1%. Intel did manage to hoist its profit to $3.1 billion from the prior year's $1.3 billion, though the latter figure was artificially depressed by charges from the amortization of goodwill.

Yet besides his cash compensation, Barrett was awarded with a grant of 584,000 options in 2002.

The options, which can't be exercised until next spring, currently trade below water. They have a strike price of $29.33, compared to Tuesday's closing price of $16.42.

However, assuming the price of Intel's stock appreciates from the date of grant by 5% over the next decade, they would be worth $10.77 million in 2012. If the stock were to grow 10% a year, the options would have a value of $27.29 million.

Meanwhile, Intel also said in its SEC filing that due to the slide in its stock price, it has divvied out new stock options to employees to keep them on board. Before the latest grant, newer employees were more likely to hold in-the-money options than veterans, a situation that was "affecting retention efforts," the company explained.

To remedy the problem, Intel offered supplemental options to workers holding previously granted options with an exercise price above $22 a share. The new options grants, granted November 2002, have an exercise price of $20.23 and vest over a four-year period.

As CEO, Barrett wasn't eligible for the repriced options; neither was board chairman Andy Grove or president Paul Otellini.

Intel is one of the most prominent defenders of options-based compensation, which it relies on heavily. It's no wonder the company has opposed moves to expense options: According to its most recently filed annual report, if Intel had expensed its options in 2001, its profit would have been slashed from $1.29 billon to $254 million.

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