Apple’s stock option irregularities escalate into a scandal as world awaits Steve Jobs’ WWDC keynote

“Just days before Jobs takes the stage at his company’s annual developer conference in San Francisco Monday, concerns about the stock option irregularities the company first announced on June 29th have escalated into a scandal,” Chris Kraeuter and Rachel Rosmarin report for Forbes.

“Apple Computer said Thursday it would probably have to restate earnings, and will delay filing its next quarterly earnings report. In a filing with the Securities and Exchange Commission, Apple said its financial statements for the years ended 2003 to 2005 should “no longer be relied upon.” The troubles go as far back as documents filed in September 2002, the company said,” Kraeuter and Rosmarin report.

“By midday Friday, shares of Apple were off almost 5%, to $66.18, a long way from where they were in early January when they hit an all-time high of $85. Two weeks ago, they’d skid to $50, as investors fretted about the lack of fresh products and the slowing growth of what the company’s got left to flog,” Kraeuter and Rosmarin report. “All of which has upped the stakes for Apple and Jobs, the company’s public face. He must show the world something new when he delivers the keynote at Monday’s conference. Really new. Something revolutionary, not evolutionary, that will excite the fans, grow the business–and change the subject.”

“The rumor machine was already churning ahead of Jobs’ speech: He is set to roll out a movie service, one Web site asserts. Could be a wi-fi iPod, predicts a Wall Street analyst. Other Apple watchers are still waiting for another stab at an iPod phone,” Kraeuter and Rosmarin report.

Full article with more specualtion about what Apple has up its sleeve here.
This too shall pass.

Related articles:
Apple warns of profit restatement dating back to 2002 – August 04, 2006
Apple loses 3.5% to $67.15 in premarket trading – August 04, 2006
Apple announces update regarding stock option grants – August 03, 2006
Shareholder’s options suit against Apple alleges ‘striking pattern that could not have been chance’ – July 11, 2006
Apple announces update regarding stock option grants – July 05, 2006
UBS: stock options probe unlikely to hurt Apple – June 30, 2006
Apple joins growing list of companies entangled in stock option ‘irregularities’ – June 29, 2006
Apple to investigate stock option grant ‘irregularities’ made between 1997 and 2001 – June 29, 2006

39 Comments

  1. As I understand it, this action is affecting a number of Silicon Valley companies that all use the stock as an incentive to execs.

    Steve Jobs. See what happens when you are nice enough to work for 1$ per year. Maybe you need to be like Exxon or other big company execs and draw 100 Mil $ pay checks. ” width=”19″ height=”19″ alt=”grin” style=”border:0;” /> Nah, lol.

    N.

  2. Hopefully, it shall pass, but it doesn’t look good for Apple right now. It is not good news that they now have to go back as far as 2002 to account for the backdated stocks. This is a very, very serious issue and someone’s head will probably have to roll to restore investor confidence.

    Apple needs to finish the investigation quickly and get this matter fully resolved as soon as possible. Very disappointing that Apple would get itself caught in such a situation – this is on the scale of Microsoft announcing yet another Vista delay.

  3. At least this was a proactionary move by Apple. They took it upon themselves to investigate the possibility. It wasn’t a reactionary move in response to an SEC inquiry. So yes, it looks bad, but it could’ve been a lot worse if the SEC had initiated an investigation first.

  4. New Type:

    You are correct. Jobs needs to make a public apology as well as make the necessary reforms and changes in business practices to ensure that this does not happen again. Better to be humble than hated.

  5. Only escalating into a scandal because the media is looking for something to report since everyone is bored with all the killing going on in the Middle East.

    I mean, it’s not like the media to overstate and overexpose news stories.

  6. The financial rules covering this stuff are arcane, constantly changing and designed to keep Tax Lawyers & CPA’s busy. The list of companies that have run into problems like this are many and not all are crooked.

    If they did wrong intentionally it would be a scandal. If mistakes were made inadvertently it is not. That’s regardless what company is involved.

    There are a lot of people who would like nothing better than to knock Steve Jobs down a few notches and quite a few write for financial ‘journals’. Selling this as a scandal is a way to get in digs at Steve Jobs, garner hits on websites and sell newzpapers/ragazines at the same time. You figure it out.

    Magic Word ‘HIT”– as in trolling for hits.

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