Apple: In Jobs we trust

Apple: In Jobs we trust

Summary: Apple Computer filed its tardy quarterly and annual statements with the Securities and Exchange Commission Friday and indicated that Steve Jobs was "aware or recommended" backdated options. However, Apple's board has "complete confidence in Steve Jobs and the senior management team.

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TOPICS: Apple
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Apple Computer filed its tardy quarterly and annual statements with the Securities and Exchange Commission Friday and indicated that Steve Jobs was "aware or recommended" backdated options. However, Apple's board has "complete confidence in Steve Jobs and the senior management team."

In other words, anyone worried about Jobs' standing amid an options probe can relax.

Nevertheless, Jobs' image is tarnished a bit and the regulatory filings didn't address recent reports about falsified documents. The big takeaway, however, is that Jobs will continue to run Apple barring some yet-to-be-found smoking gun.

Among the excerpts in the SEC filings:

--Apple recognized total additional non-cash stock-based compensation expense of $84 million after tax, including $4 million and $7 million in fiscal years 2006 and 2005, respectively. The restatement arises solely from certain stock option grants made between 1997 and 2002; the investigation found no grants after December 31, 2002 that required accounting adjustments.

--Apple's independent counsel and forensic accountants (investigative team) "reviewed the facts and circumstances surrounding stock option grants made on 259 dates. The investigative team spent over 26,500 person-hours searching more than one million physical and electronic documents and interviewing more than 40 current and former directors, officers, employees, and advisors. Based on a review of the totality of evidence and the applicable law, the Special Committee found no misconduct by current management."

--The Special Committee’s investigation identified a number of grants for which grant dates were intentionally selected in order to obtain favorable exercise prices. The terms of these and certain other grants, as discussed below, were finalized after the originally assigned grant dates. The Special Committee concluded that the procedures for granting, accounting for, and reporting stock option grants did not include sufficient safeguards to prevent manipulation. Although the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications. The Special Committee also found that the investigation had raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants.

--While Apple believes it has made appropriate judgments in determining the correct measurement dates for its stock option grants, the SEC may disagree with the manner in which the company has accounted for and reported, or not reported, the financial impact. Accordingly, there is a risk the company may have to further restate its prior financial statements, amend prior filings with the SEC, or take other actions not currently contemplated.

With the options probe out of the way there are some other annual report nuggets worth reporting. Here's a glimpse:

--Apple's research and development expenditures totaled $712 million, $535 million, and $491 million in 2006, 2005, and 2004, respectively. --As of September 30, 2006, Apple had 17,787 full-time equivalent employees and an additional 2,399 temporary employees and contractors.

--Most of the company’s products are manufactured in whole or in part by third-party manufacturers. In addition, the company has outsourced much of its transportation and logistics management.

--Apple's high profile stores such as the ones in New York City are pricey. "Because of their location and size, these high-profile stores also require the company to enter into substantially larger operating lease commitments compared to those required for its more typical stores. Current leases on such locations have terms ranging from 10 to 14 years with total remaining commitments per location ranging from $4 million to $33 million," Apple said.

Topic: Apple

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24 comments
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  • $84 M out of $1.9 B

    (that's earnings restatement, vs 2006 profits)

    Unless Jobs is somehow dragged into this more than we can see now, this is less
    than nothing. In January we get the iPhone announcement, more on iTV and Leopard,
    and a blowout earnings report.

    I'd say Apple's back on a roll.
    pdq
    • True, as long as you aren't a stock holder

      That watched the money disappear instead of pay dividends...
      No_Ax_to_Grind
      • Just curious

        ...but are you recommending the same sorts of class action suits and firings against Dell, with their actual SEC investigation (rather than Apple's currently imaginary one), or HP with their boardroom leaks scandal?
        tic swayback
      • Please explain...

        I am a stock holder...small to be sure but a stock holder. When Steve came back to
        Apple my stock was at $12 it is now what in the $80-$90 plus range and that is after
        a split a couple years back. So how am I suppose to get upset again?

        Pagan jim
        Laff
      • RE: Apple: In Jobs we trust

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    • According to a CNN article is Jobs cleared.

      "Apple says options probe clears Jobs"
      http://money.cnn.com/2006/12/29/technology/apple_jobs/?
      postversion=2006122911

      Nobody is served but Michael Dell by slapping Apple too hard, especially thinking
      about certain considerably more spectacular trials like the antitrust trials
      (government vs Microsoft) which resulted in not much more than nothing.
      Mikael_z
  • How Steve Jobs Personally Benefited from Options Backdating at Apple Comput

    Please see my blogpost at http://mrtechstocks.blogspot.com/ explaining how Jobs personally benefitted to the tune of approximately $83 million.
    techperson
    • Not many analysts agrees with it (NT)

      -
      Mikael_z
  • There is no innocent negligence if millions are at stake.

    There are fools who believe it and corrupted guys saying they "believe" it.

    Justice (as usually) on the side of ... (fools?)

    I understand that 46% of Americans have mental disorders and due to this [b]do not need justice[/b] as it should be. Is there any justice left for other half of the Americans?
    Vily Clay
    • By your logic Apple should have a great market share!

      At least in America that is...:P

      Pagan jim
      Laff
      • .. if Apple would not be so stupid, paranoiac and greedy - why not? (NT)

        (NT)
        Vily Clay
        • Congrats Viley that is the best response you've made to date!!!

          It keeps to the subject matter and it's something that can be understood and
          responded in kind to. BRAVO!!

          Greedy......well that is the very nature of buisness.

          Stupide......yes they have made some very bad decisions and at other times they
          have been brilliant. Fact is however that of all the computer tech companies that
          have come and gone over these past 30 odd years Apple was their in the begining
          and is still going strong today there are very few who can come even close to
          claiming that alone. None own both their own OS and are also hardware
          companies like Apple. So that's a tough one.....

          Paranoiac........well if you have enemies it's not paranoia now is it? Though I do
          wish they let it go at times.

          Pagan jim
          Laff
          • The good news -Laff is happy to be in minority - among Apple's zombies (NT)

            (NT)
            Vily Clay
          • Happy Minority Zombies...sounds like a movie to me!

            Pagan jim
            Laff
          • If so - never get back to reality - it'll hurt your implanted program. (NT)

            (NT)
            Vily Clay
          • Come on Viley I'll give you credits in the movie and

            split the revenues with you!!! Maybe if it sells well and or we get good DVD sailes we
            could wrangle a sequel!!!

            Pagan jim
            Laff
          • I?ll start as soon as Jobs will lose all his zombies. Can you help me? (NT)

            (NT)
            Vily Clay
  • Does it matter?

    Of course Apple is going to say "In Jobs we trust" as if they didn't confidence in future of company would come into question, stock would drop, ect.

    It's nothing different then any other company in the same situation would say, so it doesn't really matter, it's just business as usuall for corporations in general.
    John Zern
    • Agreed...

      Pagan jim
      Laff
  • Real journalism...

    The Washington Post isn't quite as sanguine about Jobs' prospects as you are...

    http://www.washingtonpost.com/wp-dyn/content/article/2006/12/29/AR2006122900253.html
    broper