NEW YORK (CNN/Money) – With each passing day, more and more prominent companies have announced that they will expense stock options.

Coca-Cola said last month that it would begin doing so. This week General Electric and General Motors both joined the club. And on Wednesday night, Citigroup said that it would begin expensing options in 2003 -- even though the move will cause an earnings hit of about three cents a share.

But similar announcements from large technology firms have been noticeably absent. In fact, several have publicly stated that they have no plans to expense options anytime soon. Microsoft, Cisco, and, most recently, Intel have all pooh-poohed the idea of doing so, arguing that there is no easy way to value them -- an argument that is losing currency as more companies step up to the plate.

Most companies use a complex (and intimidating sounding) method called the Black-Scholes model to price options, and the volatility of stock prices, especially in the tech sector, makes the use of this model difficult. But it's not impossible, and it's not the only solution. Coca-Cola, for example, has adopted a novel approach, estimating values based on the average bids submitted by investment banks that want to buy and sell the company's options.

"If options are not a compensation expense, then what is it? You are giving people something off your balance sheet that has economic value," said Alex Vallecillo, a portfolio manager for National City Investment Management Co., the subadviser of the Armada funds. "If you can't calculate a value, then why are they traded on an exchange every day?"

Companies with big options plans have come under fire recently because the salaries companies pay employees are accounted for as expenses and detract from earnings. But employee stock options -- merely another form of compensation -- don't. Also, companies get a tax break with options when they are exercised.

Options eat into profits Prominent tech companies would have had much lower earnings last year if they had to expense options. Company  Change in earnings if options expensed*  Applied Materials  -47.3%  Cisco Systems  -50%  Dell Computer  -19%  Intel  -28.8%  Microsoft  -22.8%  Oracle  -17.8%  Sun Microsystems  -34.9%   * Based on 2001 earnings  Source:  UBS Warburg

Technology companies in particular have been big granters of options, especially during the boom years of the late 1990s. And according to research from UBS Warburg, technology companies would take the biggest hit if options were expensed. Earnings for tech companies would have been reduced by more than 45 percent last year if they had to account for options as expenses.

So for a company like Cisco, which according to the UBS study would have seen its earnings cut in half last year, there is certainly more reason to resist expensing options, as opposed to a company like Coca-Cola, which would have only taken a 5.5 percent hit to its earnings.

Still, the pressure is mounting. A handful of tech companies, most notably Amazon.com and Charter Communications, have recently decided to expense options. And fiber-optic network company Level 3 Communications is already doing so, probably one reason why Warren Buffett, one of the most outspoken critics of companies that do not expense, decided to invest in Level 3 last month.

Related       MONEY surveys the option problem Bracing for an earnings hit Commentary: The 'real' options problem

Abel Garcia, manager of the AIM New Technology fund, says that technology companies may resist expensing options for the time being but that most likely they will be required to do so by either next year or 2004 at the latest. The Financial Accounting Standards Board (FASB) currently is working on a plan that would call for all companies to expense options. "Tech companies will probably not have a choice," Garcia said.

But Vallecillo thinks that it would be better for tech companies to act first. If they continue to resist, he argues, investors may end up penalizing their stocks. "The Ciscos and Intels of the world run the risk of being pinned with a lower multiple because of this issue," Vallecillo said.

One possible solution is to simply issue actual stock instead of options, says Pip Coburn, global technology strategist for UBS Warburg. By doing so, there would be no debate over the value of compensation. Plus, it would allow companies to continue giving equity-based incentives to employees. Of course, companies would lose the tax break.

But tech companies would be wise to do something about options since some fund managers have already been showing their displeasure with their wallets. Ken Broad, co-manager of the Transamerica Premier Growth Opportunities fund, says that the fund won't invest in companies that award excessive amounts of options to employees. Broad says Dell Computer is a company that the fund sold for this reason, and that Siebel Systems and eBay are two companies he has avoided because of their options programs.

"The message to the tech industry should be that the options party is over. Institutional investors are paying attention now," Broad said. "We will look through your proxy and vote 'no' on options grants."