Workers Give Up Get-Rich Dreams, Still Value Stock Options

When Jeff Solof, who joined Sun in 1997, got his first two blocks of options in 2000, they seemed bound to become worth a small fortune. The options gave him the right to buy shares of Sun at so-called "strike prices" of $40 and $46, equivalent to Sun's stock price on the grant dates.

At the time, the Nasdaq Composite Index, composed mainly of other technology highfliers, was trading around its all-time high of over 5,000. So when Solof's big payday assumed that Sun's stock price would continue to appreciate at 15% a year, that outlook seemed downright conservative.

"I went to my kids when they were in middle school and said, 'Lizzie, here's your college education, and Joe, here's your college education,'" he recalls.

Little did he know that Sun's stock was only months away from a stomach-churning freefall. After topping out in August 2000, Sun shares went on to lose 96% of their value. Now all but a handful of Solof's 13,000 vested options trade for less than his strike price.

That means he is "underwater," a term that is painfully familiar to anyone who received options after their golden age.

Solof, who now directs the editorial office for Sun's global communications, estimates that his 600 "in-the-money" options are worth a total of $168. "You think, oh, the stock price will never fall below $30," he said. "Then it was $20, then $10, then $5. Your illusions about fame and fortune sort of fall with the stock price."

The plunge in tech shares did have a curious silver lining. Employees at Sun and many other tech companies have increasingly been awarded options grants with ultra-low strike prices, making it easier for the recipients to net a profit if the stock price rises even a little.

"At this point, we're all saying it's not too shabby to get options at $3 or $4 or $5," Solof said, "because there's a really good chance we can get the stock price to double from that."

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