Money Buzz 04/02 How number-crunching could predict business success, a solution to low-worth stock options, and the value of "Patriot Bonds"

Data Delirium

Could you be growing faster if you spent more time crunchingnumbers? The answer: maybe. According to a November 2001PricewaterhouseCoopers survey, one-third of CEOs of fast-growthcompanies say they don't spend enough time reviewing indicatorssuch as cash flow and total company sales. The 9 percent who dospend too much time on the numbers also spend 16 percent more timeon the job-and their businesses have grown twice as fast over thepast five years.

But some experts say poring over numbers is a waste of time."Why should they be involved in day-to-day minutiae?"asks Dennis Hoppe, president of Hoppe Management Concepts, asmall-business consulting firm in Rochester, New York.

"I've learned to despise bean-counting," saysRobert Sherman, president of Mortgage & Financial PersonnelServices in Calabasas, California, who works 50-plus hours a week.While he keeps an eye on cash flow, Sherman insists that servingthe client always comes first. "If we're not doing that,then numbers don't mean anything," he says.

Patriotic investing

Two years ago, the government would have had trouble giving awaysavings bonds. But with the struggling market and investmentproducts short on returns, safe havens for savings are lookingattractive. The U.S. Treasury Department has responded to thatneed-and to the patriotic fervor of the post-9/11 climate-byoffering a new Series EE bond named the "Patriot Bond."Like other Series EE bonds, it sells for half the face value.

Interest is exempt from state and local income taxes andcompounds semiannually for up to 30 years. At 4.07 percent, thebond is a better buy right now than the government-issued I Bond,according to Daniel Pederson, president of The Savings BondInformer Inc., and author of Savings Bonds: When to Hold, When to Fold, andEverything in Between (TSBI Inc.). Because it'stax-deferred, "you're going to be better off compared to amoney market," he says, but you have to hold it for five yearsor pay a three-month interest penalty. Also, Patriot Bond proceedsare not earmarked solely for the military effort. "Sodon't buy it just because it's called the Patriot Bondunless you want warm fuzzies," says Pederson. "But as aninvestment, the Patriot has some merits of its own."

The Price Is Right

It's painful enough to watch the market drag your oncehigh-flying stock down into the $2 to $4 rubble. Worse is knowingyour employees' options are so far underwater they couldn'tbe detected by a Navy sub radar. The question remains: What to doabout it? Companies are increasingly coming under fire for straightoptions repricing, both from shareholders and Wall Street analystswho say it rewards poor performance. The company also gets hit witha charge to earnings, which small businesses can't afford.

One alternative that's gaining popularity is thesix-months-plus-one-day exchange program. The company can cancelexisting options, wait six months and one day, and then reissue newones at the current strike price-without the charge to earnings.Though many investors frown on the practice as repricing withoutconsequences, experts contend it's a good alternative forbusinesses-particularly in the tech sector-desperate to hold on totheir employees.

It worked for Netopia, an Alameda, California, Internetinfrastructure company. In May 2001, its stock was trading at lessthan $10, and employees were holding $48 options. The companyoffered the six-and-one program but limited it to options above$10. Says president and CEO Alan B. Lefkof, "That gaveemployees the right incentive but was not dilutive, and theinterests of shareholders, management and employees werewell-aligned."

C.J. Prince is a writer living in New York City whospecializes in business topics.

Contact Sources

Hoppe Management Concepts Inc.
(800) 724-3525, www.dhoppe.com

• Mortgage & Financial Personal Servicesmf-jobs@pacbell.net, www.mortgageandfinancial.com
• Netopia
  (510) 814-5118, www.netopia.com
• The Savings Bond Informer Inc.
  bondinform@aol.com,http://www.bondhelp.com.