Wall Street forgiving of Apple’s stock option irregularities; CEO Jobs unlikely to be terminated

“As the stock option cloud over Apple Computer Inc. darkened, investors tried to determine Friday whether the company’s popular products are powerful enough to overcome the potential accounting and legal risks facing the maker of the iPod and the Macintosh,” Michale Liedtke reports for The Associated Press.

Liedtke reports, “The possibility that the improper handling of employee stock options might erase some of Apple’s past profits or, even worse, plunge its renowned CEO, Steve Jobs, into a legal morass spooked some investors. Apple shares fell as much as 6.7 percent during Friday’s trading on the Nasdaq Stock Market before rebounding to close at $68.30, down $1.29, or 1.9 percent. ‘You can’t spin this as good news,’ Standard & Poor’s analyst Richard Stice said Friday.”

“Friday’s backlash against Apple wasn’t as a severe as Wall Street’s treatment of several other companies that have recently raised doubts about the accuracy of their past financial statements because insiders mishandled stock option awards,” Liedtke reports.

“More than 80 other companies nationwide are entangled in the stock option imbroglio. But Apple’s ubiquitous brand makes it stand out from the rest of the pack. ‘Many will be watching this case because … Apple may be the closest to a household name,’ predicted former federal prosecutor Michael Koenig, who is now in private practice in Washington, D.C.,” Liedtke reports.

Liedtke reports, “Investors might be more forgiving with Apple because the iPod’s success has propelled the Cupertino, Calif.-based company on a hugely profitable streak that most analysts expect to continue for at least the next few years. ‘The focus should be placed on what we view as Apple’s bright future not the past,’ ThinkEquity Partners analyst Jonathan Hoopes wrote in a research note Friday.”

Liedtke reports, “Most other analysts expressed similar sentiments, even as they vented some frustration. ‘This issue slightly tarnishes Apple’s squeaky clean image, but, more importantly, this does not impact Apple’s underlying fundamentals,’ Piper Jaffray analyst Gene Munster wrote in a Friday note. Optimism like that has helped Apple weather the stock option storm remarkably well so far.”

“American Technology Research analyst Shaw Wu… estimates Apple’s stock option expenses for the past seven quarters have ranged from 3 cents to 6 cents per share while the company’s earnings have been much higher, ranging from 34 cents to 65 cents per share,” Liedtke reports.

“Much of the angst about Apple centers on whether the stock option headaches will distract Jobs or land him in legal trouble,” Liedtke reports. “Apple already has acknowledged that some of its nettlesome stock options were given to Jobs, but also emphasized that they were canceled in 2003 before he realized any gains a factor that might help insulate him from any possible fallout. ‘While we are not exonerating management for its error in judgment, we believe a ‘worst-case’ scenario where Steve Jobs is terminated is … unlikely to unfold,’ Hoopes wrote.”

Full article here.

MacDailyNews Take: Steve Jobs is unlikely to be terminated. Well now, that’s good to know. In related news, it’s forecast to hit 90° F in New York City on Saturday, but a ‘worst-case’ scenario where the Empire State Building bursts into flames as a result is… unlikely to unfold.

Related articles:
Apple’s stock option irregularities escalate into a scandal as world awaits Steve Jobs’ WWDC keynote – August 04, 2006
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

27 Comments

  1. It’s bullsh-t. Anyone who believes Jobs or Apple are in serioius trouble doesn’t understand the day-to-day business world. The writing was on the wall long before this “news” hit the press: Apple already knew they were in the clear before letting this story out. There’ll be nothing to this at the end of the day … except for more record AAPL prices.

  2. Operatile 895 and No Kool Aid here,

    The MDN Take is making the point that even mentioning the termination of Steve Jobs due to this minor issue is akin to suggesting that the Empire State Building might catch fire because the temperature hits 90-degrees F.

    It’s a perfectly appropriate analogy. Perhaps you didn’t understand it?

  3. It is really good news that Steve voided the offending options years ago. That plays really well. Thank goodness he is not greedy like me and the rest of us in Redmond. It would be a bit humbling to do a keynote address from a minimum security prison! The legions would not desert.

    Mr. Jobs has already done his comeback. We can leave it to Martha Stewart to demonstrate how it is done after jail.

  4. OK, lets fire him, is salary is $1 dollar a YEAR! He (Steve) never made any money on the stock option and the mistake was clearly caught before hand. Why should he pay for the mistakes when the accountants are to blame?

    This just makes good fodder for the papers.

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