Cisco plan on option expensing is rejected

Here's a big story.It not only affects Cisco systems but many other technology companies and their earnings.The San Jose Mercury reports:

Many valley companies hope to find a way to lower the cost of options because billions of dollars of profits are at stake. Local technology companies hand out more options to employees than anywhere else in the world.

The most immediate loser is Cisco Systems. If the new accounting rules had applied last year, the San Jose networking giant would have been forced to erase almost 20 percent of its profits -- $533 million -- under the standard formula it used for valuing options.

In May, Cisco acknowledged that it was seeking SEC approval to create a complex ``derivative'' investment that would mimic its employee stock options. That way, the value would be set by actual trades on Wall Street, not by mathematical calculations in a black box. Cisco's expectation was that investors would value such options at a much lower price, thereby allowing more profits to remain on its bottom line.

The SEC said no.