October 6, 2005 6:10 PM PDT

Stock option accounting arrives at Sun

Sun Microsystems, a company whose chief executive has long opposed treating stock option grants as an expense, is in the process of introducing the accounting measure.

Because of regulatory requirements, Sun will introduce the stock option accounting Nov. 1 when it reports results for its fiscal 2006 first quarter, which ended Sept. 30.

Merrill Lynch analyst Richard Farmer said in a research note Thursday that he expects the accounting change to reduce Sun's earnings by 2 cents per share to a loss of 4 cents. His projections forecast Sun performance below average expectations for the quarter, a loss of 1 cent per share. But Banc of America Securities analyst Keith Bachman said Thursday he expects Sun to meet that consensus expectation.

CEO Scott McNealy is an outspoken opponent of stock option expenses, an accounting move that directly diminishes a company's profit. Sun has been accelerating stock option vesting schedules and awarding stock in addition to options to sidestep some expenses.

 

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