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Insight gears for future with stock options

In Depth: Computers & Office Technology
Dated:10.10.1997 The Phoenix Business Journal
Mary Vandeveire: The Business Journal

Tempe-based Insight Enterprises Inc. is building from the inside, through stock option plans for employees.

The computer hardware and software distributor adopted a stock option plan when it went public in January 1995.

"It aligns the employees' goals with those of the shareholders -- and that's to maximize the value of the stock," said Stanley Laybourne, Insight chief financial officer.

"A stockholder wants to see the price go up and an employee has the same goals so he can reap some reward. We think that's in everybody's best interest."

Insight employees from all areas of the company's operations, including distribution, are given stock options as a way for the company to attract talent.

"Most particularly in tech-based companies, [employees] are very much geared toward stock option plans," Laybourne said.

The downside to options is dilution of share value for existing stockholders by increasing the number of shares outstanding. Laybourne noted that, for tech-based companies, the market is generally OK with stock option plans that don't exceed 20 percent of the shares outstanding.

"Is the employee motivation worth the dilution?" Laybourne said. "We believe it is. That's why we do what we do."

Insight employees typically are given stock option plans that can be exercised over a three-year period. Exercising options "gets the positive feeling in their pocket," Laybourne said. "They can take some opportunity in the company. Otherwise, it's all paper."

Insight stock, which trades on Nasdaq, has gained about 86 percent for the year, taking into account a three-for-two stock split which took effect Sept. 18. The shares closed at $32.88 Oct. 3, up from a Jan. 2 close of $17.67.

A handful of executives recently profited from the company's stock market gains.

Denny Chittick, who left the company July 31, exercised an option for 25,000 shares at 72 cents each and sold them at $39.50 each -- a gain of about $969,500.

Other insiders netted a combined profit of about $253,650. In options exercised from Aug. 6 to Aug. 29, four executives bought 10,710 shares, paying prices ranging from 72 cents up to $23.75, and sold 8,750 shares, at prices ranging from $41.13 to $42.50.

Laybourne exercised an option for 1,500 shares of common stock at 72 cents each on Aug. 22, and sold them at $41.75.

Insight reported record net sales, net earnings and net earnings per share for the fiscal fourth quarter and year ended June 30.

Net sales for the fourth quarter were up 39 percent to $139 million, compared with $100 million in the year-ago quarter. Net earnings in fourth quarter 1997 rose to $2.9 million, up from $1.79 million in the comparable period for '96, a 65 percent increase. Net earnings per share for the quarter ended June 30 climbed to 42 cents, compared with 31 cents in the year-ago period, a 35 percent increase.

For the year ended June 30, Insight reported net earnings of $9.86 million, or $1.49 per share, compared with $5.7 million, or $1.08 per share, for fiscal '96.

The split in September brought Insight's shares of common stock outstanding to 10.2 million, up from about 7 million June 30.

printed with respect to The Phoenix Business Journal

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