eBay Clings to Its Options Habit

Rather, the company would have posted three-straight years of losses from 1999 through 2001, including a whopping $117.99 million, or 44-cents-a-share loss, in 2001. Last year the company would have been in the black, although not by as much as it reported. Instead of a profit of $249.5 million, or 85 cents a share, eBay would have posted a profit of $62.9 million, or 21 cents a share.

That difference between eBay's reported earnings per share and what it would have reported if it had to take options into account is the result of eBay being one of the more prolific dispensers of options.

In 2002, for instance, eBay's net option grant, which represents the total options granted minus canceled or terminated options, was 11.8 million options, or more than 4% of the company's outstanding stock. In contrast, fellow Internet leader Yahoo!'s net option grant amounted to about 2.25% of outstanding shares last year. Meanwhile, Amazon.com actually had a negative net option grant last year, as its total number of canceled shares was about four times larger than its gross grants.

At the end of 2002, the unexercised stock options held by eBay employees and executives equaled about 12% of the company's outstanding shares. That number was higher than rival Amazon.com, where unexercised options equated to about 11% of outstanding shares.

Taken for Granted: eBay's Options Loom Large Among Fellow Tech Firms Options grants in 2002 (numbers in thousands)
	Granted	Canceled	Net grant	Outstanding shares (end of prior year)	Net grant as % of outstanding shares
eBay	16,866	5,023	11,843	277,259	4.27%
Intel	173,600	45,300	128,300	6,690,000	1.92
Cisco	282,000	82,000	200,000	7,324,000	2.73
Yahoo!	32,566	19,630	12,936	575,520	2.25
Siebel	5,887	56,967	(51,080)	466,950	-10.94
Amazon	3,045	12,262	(9,217)	373,218	-2.47
Notes: Siebel bought back 28 million options in 2002, mostly from CEO Tom Siebel. Cisco's fiscal year ends in July.

As a fraction of outstanding shares, other tech companies have larger pools of unexercised options. Because of the increase in its share price, however, the average option at eBay is in the money -- which is not the case with many tech companies. The average price of an unexercised option at eBay at the end of 2002 was $53.73; the company's stock closed at $103.05 on Tuesday. In contrast, the average price of an unexercised Siebel(SEBL Quote) option at the end of last year was $17.42; Siebel's stock closed at $9.17 Tuesday.