“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
“The Martha Stewart and Apple situations are TOTALLY different things.”
The potential charges would be different.
The similarities would be that despite each person’s extreme importance to the company, if criminal activity were shown he would have to as a matter of law be dismissed.
No discretion would be involved, no hand wringing about whether it would harm the company, just a simple, automatic legal decision that Steve would have to leave his current role.
Even then a position much like Martha’s would probably be created for him, one that it’s not illegal for a criminal to hold.
Meanwhile in the NYTimes:
“Disney, meanwhile, sharply changed course under Mr. Iger, its new chief executive, who acquired Pixar Animation for $7.4 billion earlier this year. He then went further and scaled back Disney’s own feature film production.
As the analyst Richard Greenfield of Pali Capital noted in a report last week, Pixar’s “Cars” has earned less overseas than the last Pixar hit, “The Incredibles,” trailing it by an average of 54 percent in five countries, including Britain and Japan, after several weeks of box-office results.
While it may be too early to judge the ultimate success of the Pixar acquisition, “it is certainly worth considering how much lower Pixar’s stock would be today” because of “Cars,” Mr. Greenfield wrote. It was a polite way of asking: Just how much did Disney overpay?”
http://www.nytimes.com/2006/08/06/business/yourmoney/06frenzy.html?th=&emc=th&pagewanted=print