Siebel Sends Mixed Signals With Options Buyback Plan; Pays For "Underwater' Options; The move reinforces notion that stock options are form of compensation, critics say.(INTERNET & TECHNOLOGY)

Byline: J. BONASIA

To expense options or to not expense options. That's the question for Siebel Systems Inc.

Chief Executive Tom Siebel has insisted that it's wrong to treat employee stock options as an expense. But his actions are sending mixed signals.

Siebel Systems said last week that it would buy back employee stock options valued at $40 or more. The company will pay $1.85 in cash and stock for each option. Its shares currently trade below 9, so the options of many employees are "underwater" -- they can't be exercised for a profit.

The move signaled to accountants and analysts that Siebel sees its options as a form of worker compensation. And that lends credence to the idea of recording them as expenses.

But Siebel and tech lobbyists continue to fight the idea of expensing options. The value of the options is too difficult to determine, and no cash changes hands, they say. The options simply transfer equity from existing shareholders to those who cash in the stocks.

Moreover, tech firms depend on options to lure and retain top talent. If they were forced to expense options, it might put a damper on the practice. And the consequences could be severe, says TechNet, a lobbying group.