Jobs not implicated

Following Apple's after-hours announcement on Thursday, one analyst believes that Apple CEO Steve Jobs is not liable for recently discovered stock irregularities and that any impact on its financial status will be minor. While Apple has not been formally charged by the SEC and has the company received a formal inquiry, American Technology Research (AmTech) senior analyst Shaw Wu was not surprised by the update. "We continue to believe that even in the worst case scenario where Apple is found guilty of improper options granting, we do not believe Steve Jobs is liable, the reason being the compensation committee at Apple is run by an independent board that is not comprised of employees of Apple," Wu wrote in a research note obtained by MacNN. The firm maintains a "buy" rating on Apple shares with a price target of $75.

Wu anticipates a minor impact to GAAP financials, but said that stock compensation at Apple is not a large component relative to its earnings and compared to most other technology companies.

"At the present time, the three members of the compensation committee are Bill Campbell, Mickey Drexler, and former Vice President Al Gore," Wu said. "There is no change in our fundamental opinion on Apple."

Apple initiated the internal investigation in late June, saying that it had discovered irregularities related to the issuance of certain stock option grants made between 1997 and 2001, one of which was given to company CEO Steve Jobs, but was later cancelled and resulted in no financial gain to the executive.

Apple falls on probe worries

Apple shares fell as much as 4 percent the day following the announcement, despite reassurance from analysts that the probe would not significantly impact the iPod-maker.

"We believe potential financial damage [and] penalties from any options irregularities are likely to be limited and cash flow would not be impacted," UBS analyst Benjamin Reitzes said in late June. "According to the company's 2004 proxy statement, in March 2003, Mr. Jobs voluntarily cancelled all of his outstanding options, excluding those granted to him in his capacity of director."

Lawsuits filed

Apple announced in early July that it had been notified of derivative lawsuits filed in the U.S. District Court for the Northern District of California and the Superior Court for Santa Clara County, making claims against former officers and directors with respect to the company's stock option grant awards. The investor suit named top Apple executives, including CEO Steve Jobs and executive officer Michael Spindler, along with other high-level management.

SEC, Feds prepare to charge

The chairman of the Securities and Exchange Commission announced in mid-July that federal securities regulators had begun preparing to file charges in the case against Apple for backdating of stock options.

Prosecutors and the SEC were probing several companies whose executives received options in company stock at low prices just before big jumps in share prices. Backdating is comprised of both civil and criminal components, including forging documents and lying to boards and investors. The SEC will handle civil charges, while the Justice Department as well as the San Francisco-based U.S. Attorney's Office have launched their own criminal investigations.

by MacNN Staff