Mr. Goldman said the acquisition would cost Pepsi about 15 cents a share in earnings dilution.

Food Lion investors were not wild about the deal, largely because of the premium and likely earnings dilution, analysts said.

The calculation of earnings dilutions derives from this same process as control dilution.

"This company's losses will be substantial down the road," Mr. Natale said, "and they will eventually need capital, so there will be the potential for a large earnings dilution."

"And of those remaining companies, what the earnings dilution would be and how it would affect the balance sheet."

We continue to see Premier as a high risk/high potential return investment where the principal risks to valuation are trading uncertainties and earnings dilution.

"They are taking on a huge mountain of debt, and they are looking at significant earnings dilution for at least the next 18 months."

But no longer seeing automatic profits in the stock, some Microsoft investors may start to care about earnings dilution.

It is in the longer term that shareholders will suffer from earnings dilution, they said.