Suit: Sun fired US workers to hire lower-paid Indians

Boston Globe ^ | March 18, 2003 | Hiawatha Bray

[_Jim]

What may be sauce for the gander (Coke) may be poison for the goose (tech companies) when it comes to stock options - from the article you linked earlier:

Be that as it may, information technology giants in the US are still violently opposed to any change in favour of expensing of options. This is understandable.

While Coca-Cola and the Washington Post Co make comparatively limited use of options, Mr Chuck Mulloy, a spokesman for Intel, has summed up the plight of tech firms: "At Intel, all 83,000 employees are eligible for and get stock options. We use it on a much broader basis (than) Coke. It's more culturally integrated in our business...."

(my) interpretation: expensing stock options would impact the bottom line of Intel much more than Coca-Cola.

[_Jim]

Sun was started by an Indian Engineer.

The idea, the actual *incorporation* of SUN or the name?

From http://sg.sun.com/hotnews/press/2002/28feb.html we get:

Sun was started by four individuals in their twenties who envisioned a powerful, networked desktop computer ...

and from http://www22.brinkster.com/beeandnee/quiztime/organisations.asp we get

Sun Microsystems: Sun was originally an acronym for Stanford University Network! The company was incorporated in February 1982 with four employees.

The four were Scott McNealy, Vinod Khosla, Andreas Bechtolsheim (all three from Stanford University) and Bill Joy.

[eno_]

Also, options are not hidden in any way. The fully diluted share numbers are publicly available. Moreover, this dilution only will happen if the options are in the money - far from certain these days.

To me, expensing options sounds like a tax wheeze for copmanies that have large free cash flow and a large profit they want to shrink. OK, fine, but don't call it accounting reform.

[_Jim]

And from http://www.stanford.edu/group/gsb-ec/gsb_entrep.html (Profiles of Recent Alumni Entrepreneurs) we get:

Scott McNealy and Vinod Khosla, the founders of Sun Microsystems, Inc., graduated from the Business School.

[eno_]

Well it depends on whether you have anything to say with those skills. Just-a-coder, yeah, under $50/hr., and if you work through a body shop, bend over and grab your ankles. A really good coder that can be put on a commercial product (not IT) team could bill $100/hr.+ 50-60hr./wk. even in the current sucky economy.

[_Jim]

Moreover, this dilution only will happen if the options are in the money

Let's see, we have 'options' and 'stock grants' to my limited knowledge available for rewarding employee performance.

In the one case (former) the 'option' price has been fixed (you will owe an amount equal to the share_price times number_of_share_options) whereas the 2nd is a giveaway ... correct me if I'm wrong, but would the granting of 'options' dilute the total number of shares - because my thinking is that these shares that are already 'issued' - but held - by the company?

The 'expensing' would then have to be computed using the current market value of a share minus the amount you paid per share leaving the 'a value', an amount, that the company 'awarded' you ... again, correct me if I'm wrong here ...

[PETAMember]

Glenn, this crap happens all the time. For those of a Libertarian bent, I suggest that the only fair thing to do is institute H1-Bs for ALL trades/crafts/professions. Starting with lawyers, of course. If I can get my car fixed by somebody from ??? for $5.00 or $10.00/hr, than I guess I can live with H1-B. Otherwise, this suit is perfectly legitimate.

The big expansion of this program, by the way, took place under the administration of our favorite guy, the Clintoon himself. Just in case anybody ever wondered why we used to see all those news articles about how Bill and Internet Al were so popular with the Silicon Valley "Entrepreneurs". Sun and the rest of that crowd were also glad to have the Justice dept attacking MS for having popular products, too.

Has nothing to do with competence or skill shortages, just a chance to find good programmers with lots of experience that will work for data entry salaries, travel 100%, and listen to moron managers in meetings and act impressed. Lots of very capable Indians will do all of this rather than go B2B (Back to Bangalore).

Good luck to these folks...

[eno_]

The valuation is complex than that, since there is no "today" cost in issuing the option, you deduct what you think it will be worth (and then if it isn't worth that, you adjust in some hideously complex way).

Yes, as far as I know, all options have to exist as treasury shares (at least they did in two VC funded start-ups I was involved in from the beginning). So the dilution happens when these shares actually get bought from the treasury at the strike price of the option. If the strike price is above market price, the option will almost certainly not be exercised, and if it is the company could, at less-than-zero cost, replace the treasury shares by buying shares at market price. So everybody always knows how many shares COULD go on the market (authorized but not issued), how many shares outsiders own (the "float"), the strike price of all options, etc. Nothing is hidden.

[stylin19a]

That is in direct violation of the H1-B law
That's exactly right. And everyone glosses over that fact. A lot of companies are going over to L-2 visa's which legally produces the same result.

[muawiyah]

Hold on regarding the "shelf life" debate you are into. I've observed over several decades that the "management" team steering your typical IT operation froze themselves out of understanding software the day they became "managers".

Doesn't mean the managers aren't smart guys; but with software, engineering, and many other scientific or demanding fields, you can spend your time "managing" or keeping up with your field. Most folks who become "managers" simply no longer have the time to keep up. Some of them, of course, had no interest in the field in the first place but saw which jobs got paid the big bucks.

The problem for the folks who continue to work in the field and keep up with it is their peers who went into management think everyone in their own cohort has ceased to learn or keep fresh.

[dark_lord]

But not with PHP, MySQL, Apache. That's just web page serving - a basic 3 tier architecture. And PHP is just a dumb C. Python is the same. And you don't see people building software products out of Python and PHP, by and large. So nobody is paying big bucks for that. Finally - except for specialty skills in niche markets - certain gaming programmers, some C++ coders in the trading industry, certain real time programmers -- the managers are too stupid to tell the good coders from the mediocre ones, so the good ones get paid about 10% to 20% more than the mediocre ones.

[_Jim]

Sun was started by an Indian Engineer.

I'm going to have to give you only *partial* credit on this one (not that I have to, not that you need to hear that from me or anyone else, but I thought I would take this 'tack' in lieu of any others) since this Indian was not an Engineer but rather a venture capitalist when he founded SUN Microsystems!

Khosla came to the United States after completing his B. Tech. degree at the Indian Institute of Technology, Delhi. But before coming, he attempted to start a company in India, and confessed being frustrated by the experience. In the US, he completed a M.S. degree in biomedical sciences at Carnegie Mellon and came to Stanford University to do an M.B.A. After the management degree, getting a high-paying executive’s job at a large American corporation would have been the career path for most immigrants, but Khosla chose a different one for himself.

When he graduated from Stanford in 1979, Khosla laid down several conditions a company must meet before he would even apply. “I would only work with companies started after 1976...”Khosla said. “I would only work with companies that had less than a hundred employees.” He sent out 400 applications, but did not receive any job offers.

Vowing to become a millionaire before turning 30, Khosla turned to entrepreneurship and found a business idea and partners at a Stanford business club. Daisy Systems, a computer-aided engineering and design company, failed quickly because the economics of the market went against it.

Undaunted, Khosla scouted for opportunities to develop an inexpensive multipurpose workstation, again finding one right inside the campus -- at the Stanford University Network. He met up with Andreas Bechtolsheim, who had designed a workstation that he was licensing to companies for $10,000. The persuasive Khosla wanted Bechtolsheim to stop licensing the workstation, and instead start a company to manufacture them. He won over the German immigrant, saying, “I want the goose that laid the golden egg, and I don’t want the golden egg.”

Then 27, Khosla also roped in Scott McNealy, a buddy at Stanford business school, and Bill Joy, also of Stanford, to start Sun Microsystems. The company changed the face of computing and at a market cap of over $150 billion, it is the largest corporation founded by an Indian. Khosla though did not play a part in building the company to its present size because he was eased out of his position as CEO in 1986 because he had become an unpopular manager, and easily ruffled the feathers of employees.

From: http://www.siliconindia.com/magazine/display_back_issue.asp?article_id=704

P.S. If you notice in this excerpt it was a German Immigrant who had actually developed the workstation that SUN was first built on ...

[rdb3]

rdb3, MA in CS

Will program C/C++ for food

[glorgau]

Which cliche?

"Thank you, come again!"

I think you mean CLIQUE. ROFL.

My Fruedian slip is showing...

[VeniVidiVici]

Are the Indians Apaches or Comanches?

Neither. They're Sioux :-)

Seriously, though. Dump H1B.

[eno_]

Yes, I was thinking games: MMRPGs, ARGs, etc. This is one area of mass-market product development that isn't dead.

You gotta know how to build a server for zillions of users that will scale. Not trivial.

[Jumper]

I'm sad for each person affected negatively... but the fact remains that America and other industrialized nations have chosen to allow immigaration to people with skills. Many of these people were educated in American Schools or worked for American Corporations overseas. The belief that you get what you pay for, is in the greater context, correct - if you understand that workers brought in to help. Nobody is promised a job in America. The reason IT folks are well paid is knowledge. 3-5 years experience is the first real benchmark. In that time span, these new employees will have put the cap on wages in the IT sector to some extent. Do I feel my job is in jeapordy - yes, but that only serves to make me work harder at every aspect of the organization, e.g., administration, inventory control, personnel management/relations, backup plans, and general IT functions (I look at all the inspection guidelines, all the security guidelines, etc., and implement them after work and on weekends without pay). When my employeer looks at me and my part of the business infastructure, he knows he is better off.

[Glenn]

I've observed over several decades that the "management" team steering your typical IT operation froze themselves out of understanding software the day they became "managers".

I wasn't defending managers. I was defending an attack on graying programmers and engineers.

My company (FedEx) has dual-track career paths up to the level of vice president. Many pure engineers make a salary equal to managers because of it. And a lot of those guys have grandchildren they visit on vacation (including me). It's a good system.

[RnMomof7]

There was a program on TV about India Institute of Tech..being the finest engineering school in the world..they intervied the man that they said started Sun..an Indian a grad of IIT...

Vinod Khosla general partner, Kleiner Perkins Caufield & Byers

Forbes calls him "One of the Movers and Shakers of the Tech World". An influential VC of Silicon Valley today, 47-year-old Vinod Khosla is best known for co-founding Sun Microsystems, the largest corporation founded by an Indian. He also set up Daisy Systems, which was one of the first companies to go after the computer-aided design software market. An IIT Delhi and Stanford Graduate School of Busines alumni, he is on the boards of Asera, Corio Inc, Juniper Networks, Redback, QWEST Communications and Zaplet Inc.

http://www.dqindia.com/content/20years/102122103.asp