Apple Announces More Options Troubles

fremen writes "Apple today announced that they will be withdrawing their financial reports back to September 29, 2002 and delaying the filing of future reports after finding more backdated options problems. Companies backdate their stock options by looking back over a period of time and choosing a historical low as the option strike price. While not illegal, this must be fully disclosed to investors and properly accounted. Expect more uncertainty in the coming weeks as regulators must now uncover how much of Apple's record profits were incorrect as well as whether or not Steve Jobs will be able to continue leading the company."

Isn't this an issue for the CFO

[mgv]

Wouldn't this be an accounting issue, for the Chief Financial Officer, not the Chief Executive Officer (Jobs)?

Michael

Who?

[myspys]

Who in their right mind would remove a CEO (a loved one at that) of a successful company? A company whos share price is soaring nevertheless

Re:Steve Jobs leading Apple

[Duds]

Being legally prevented from being a director of any company would do the trick and is a distinct possibility.

bah

[spykemail]

Bad news for shareholders and possibly some Apple employess, but unless this is an extremely massive problem it shouldn't really have much effect after a couple of initial punishments.

Re:"...whether or not Steve Jobs will be able to..

[Anonymous Coward]

Exactly - I'm at the edge of just giving up on reading Slashdot entirely with the retarded articles coming through lately with little jabs thrown in throughout. It's always had it to a small degree, but it's just getting worse lately.

Re:Isn't this an issue for the CFO

[Ohreally_factor]

It's just another retarded slashdot tagline, except it doesn't have the question mark. Imagine the summary ending with "Are Steve Jobs' days at Apple numbered?" or "Will regulators force Jobs to resign from Apple?" to get the usual slashdot flavor.

As far as your question goes, it depends on the extent of the scandal at Apple. All indications are that this is not that big a deal. It's not Enron, it's not Worldcom, it's not Tycho, it's not Adelphia. It's going to hurt Apple a little bit now, but they seem to be taking their medicine rather than covering up. Apple is the one coming forward with the information, not a whistle blower.

Also, this isn't an isolated case, but part of a much wider phenomenon. A lot of companies in many industries have been engaging in this sleazy practice. A lot of them are coming clean. However, by the time the SEC actually does anything, this whole thing will be in the past for most companies (which is why the smart thing to do is to do your own internal investigation and come clean on your own).

The only way that upper management will really get bitten in the ass is by shareholder lawsuits that hold them personally liable. I'm not too worried on Jobs' behalf on that score.

At any rate, let's wait and see what the restatements are. Then we can see how much of a mountain or a molehill this will be.

Re:Who?

[Ohreally_factor]

Someone who realises the truth, that the loved CEO of said company is only loved because of the success of his company, and his company is only showing successful because of dodgy accounting.

Care to support that statement, other than by citing a comparison to Enron? Anything that shows Apple's success is faked by cooking the books? Where is this "discrepency" in numbers, other than a figment of your imagination?

I think you don't understand the nature of this particular scandal. Yes, it's a scandal. But it's not in the least comparable to Enron. And it's emphatically not about discrepancies in iPod sales. It's about sleazy stock option practices.

Re:Steve Jobs leading Apple

[iiioxx]

Being legally prevented from being a director of any company would do the trick and is a distinct possibility.

The Securities and Exchange Commission has jurisdiction only over publicly traded companies. They could not prevent Steve Jobs (or anyone) from founding a company and sitting on it's Board or executive management team, so long as that company remained privately held and did not make a public stock offering.

I smell misrepresentation

[KDR_11k]

While I have no actual idea what that means I have a feeling the interpretation in the summary is a bit sensationalistic. If it really was that bad, would Apple really do it? Or are we really facing an Appleron?

Re:Jobs will have to leave

[Anonymous Coward]

The shareholders might not like tolerate things like this, but they're clever enough to know that Jobs IS Apple, and they'd lose a lot of their appeal if they made him resign. Remember what happened last time he left?

Re:Who?

[rahrens]

It also does not erase the numbers of product sold. It may change the bottom line, because an actual profit as reported can be diminished by such charges as they are speaking of.

But Apple still sold the same number of Macs and iPods as previously reported - *those* numbers will NOT change, and those numbers still reflect a growing business.

Re:Jobs will have to leave

[ZenKen]

1. There's a difference. Enron was purposefully and illegally cooking their accounting books and they got caught. Apple themselves noted a discrepancy between practice and what should be reported to shareholders. Enron executives bilked shareholders out of billions of dollars. Apple granted stock options backdated at the lowest price and did not include them on a report. 2. One company self-reporting a problem does not make a trend. There are thousands of companies, and statistically I would wager that there are more than a few that have also reported similar discrepancies over the course of their existence. Thus, there is nothing stating that the CEO should have to leave his company for discrepancies filed by his own company (and the finance department, no less). Your perception is not reality. While I agree that the 'public' won't tolerate being ripped off, they also should know that this doesn't fit the 'being ripped off' scenario. I understand where you're coming from, but I don't think this is such a scenario.

heavy FUD

[TRRosen]

Talk about overblown. This is basicly a minor accounting issue. No laws were broken it just wasn't written up right. At worst the restatements would change things by a couple of million total. were talking about the difference between a stock grant at $35 a share instead of $30. and Apples not a big option company like microsoft. Infact this will acually make Apple money. The restated earnings will reduce there taxes making 30% of the restatement show up as extra cash.

This is basiclly a case of "oops we paid our executives 12 million dollars not 10...our bad"

peran is a troll.

[eshefer]

I just love this comment..

"but as is becoming increasingly clear with Apple, that success is not to do with doing good business, rather it's just bad accounting"

have you been outside these last two years? you go on the subway or any metro and you see that 1 out of 5 people has white earbuds sticking out of thier ears.

Re:Steve Jobs leading Apple

[indifferent children]

As I understand it (IANAL, IANAA) Sarbanes-Oxley changed this. Now the CEO is required to sign a statement that the companies' financial reports are correct.

Re:Steve Jobs leading Apple

[Total_Wimp]

Steve Jobs leading Apple

What could stop him in the long run?

The article insinuates that regulators can stop him. I doubt that's true. Unless the numbers are Enron-like, the board is very unlikely to dump him. My take on the article is that the overstatement of profits is significant, but not as significant as Steve Jobs leadership.

TW

Stupid submitter

[gnasher719]

Sometimes I think people who submit articles to Slashdot are pure idiots.

The original article makes no mention of "backdating options" whatsoever. "Backdating options" is an illegal and criminal method of giving employees more money by chosing the date of an option grant long after the option is granted, usually to a time when the stock was low. Even just with the usual random fluctuation of the share price, this can make options much cheaper and therefore more valuable for the employee. However, nothing like that was mentioned in the article at all. What was mentioned was "possible irregularities in the accounting" of the value of stock options, which was found by Apple itself in an internal inquiry that it started itself, and it was Apple who called the SEC about it, not the other way round. And since the rules for the accounting of stock options have changed a lot in the recent years and are quite complicated, it is quite possible for a company to account them incorrectly by mistake. The bit that the submitter added about Steve Jobs has been pulled out of thin air altogether, just to make it sound more interesting.

This is like Mr. Smith calling the Inland Revenue, telling them that he might have made a mistake in his tax returns, and a submitter on Slashdot calling him a thief and criminal.

Re:Who?

[indifferent children]

This time, apple may truly be dying.

As Neal Stephenson said about Apple in In the Beginning was the Command Line [cryptonomicon.com]:

The smaller dealership continues to sell sleek Euro-styled sedans and to spend a lot of money on advertising campaigns. They have had GOING OUT OF BUSINESS! signs taped up in their windows for so long that they have gotten all yellow and curly.

Step by step

[gnasher719]

"Apple today announced that they will be withdrawing their financial reports back to September 29, 2002 and delaying the filing of future reports "
Correct.

"after finding more backdated options problems. "
Incorrect.

"Companies backdate their stock options by looking back over a period of time and choosing a historical low as the option strike price. While not illegal, this must be fully disclosed to investors and properly accounted."
Incorrect. Backdating options is illegal, that's what people will go to jail for. That is also what Apple hasn't done .

Expect more uncertainty in the coming weeks as regulators must now uncover how much of Apple's record profits were incorrect "
Regulators are not involved in this at all. This is an Apple internal inquiry.

"as well as whether or not Steve Jobs will be able to continue leading the company."
Taken out of thin air.

In other words, the submitter took one line from the quoted article, then added 90 percent bullshit to it.

Re:Who?

[asuffield]

The SEC and the courts. It's what they're for. They don't need to remove the CEOs of unsuccessful companies - those are self-resolving problems. It's the criminal management of successful companies that needs forcibly eliminating.

Remember, Enron was a sucessful company with a share price that was rising.

(This comment has nothing in particular to do with Apple, it's just an answer to the question asked)

Re:Who?

[Daytona955i]

Someone who realises the truth, that the loved CEO of said company is only loved because of the success of his company, and his company is only showing successful because of dodgy accounting.

Wow, you don't get out much do you? I don't really understand the financial stuff that much. I really don't understand what happened at Enron other than employees lost their benefits. (which really sucks) I also don't really understand what is going on in this case but, to say that the success of Apple is only due to dodgy accountin is just mind boggling. I think even someone who hate's apple would say they were successful in selling the iPod. That's why everyone talks about an "iPod killer." But they still haven't been displaced. With the switch to intel processors, the number of computers they are selling has increased. I for one know quite a few people who now have MBP's who would have never before considered getting a mac.

But whatever, go outside and start counting the number of iPods you see. Then start taking a look at the number of Mac laptops you see. Steve Jobs, like him or not, saved apple by bringing the technology from NeXT to apple. I admire him for what he's done to both Apple and Pixar. Also this is Apple who is doing their own internal investigation, not someone else who caught them in the act. This is them saying "wait, I think we made a mistake." From other comments I've read, this seems to not be a big deal (certainly not on the scale of Enron) and if Apple makes ammends and says basically, "we screwed up but now we've fixed it," I give them a lot of credit.

A simple plan.

[BDaniels]

1. Post bogus story to /., with incorrect statements and FUD about Jobs being forced to leave Apple.
2. Wait for damage to Apple stock prices.
3. Buy cheaper shares of Apple stock.
4. Profit.

Re:Steve Jobs leading Apple

[toleraen]

The article insinuates that regulators can stop him. I doubt that's true.

The regulators could stop him. But that's why Apple did the right thing and came forward about it, launched a third party investigation, and is trying to clear things up. The industry I work in sees something similar with export control violations. The governing agency is usually much lighter on penalties and such if you come forward about it. I imagine that the SEC operates in a similar manner. Getting audited and finding out Apple knew about it all along, but didn't do anything about it, would be far, far worse.

Re:Isn't this an issue for the CFO

[Ohreally_factor]

But the possibility of Jobs being forced out is miniscule at this point. A whole lot of things would have to happen, and a single disclosure of this lesser magnitude does not constitute that chain of events. So the speculation is just dumb. The seekingalpha article is dumb. And factually wrong.

You will grant me, my dear Whiney, that I never said that everyone does it. I said it was a widespread problem. The two are not mutually exclusive. I hope you're not trying any of your jedi agitprop tricks with me! They won't work! (Don't try to put words in my mouth and I promise I won't try to put my dick into your mouth.) =)

I never said this wasn't a serious matter. All I've said was that it was ridiculous to compare this to Enron or Worldcom.

Is this some fucked up shit? Yeah.

Is it some majorly fucked up shit? No.

Anyway, it's a sad day for Apple, but I've seen much sadder. Unless the news gets a whole lot worse, I don't even think this counts as much of a stumble. Please don't misunderstand me, though. I don't want to lessen your joy on this occasion one iota, so long as it's based on reality. So laugh at the stupid clowns at Apple that fucked up. Cross your fingers in hopes that it will get worse. Just don't jump the gun!

And as always, good to see you, hope your day is terrific, blah blah blah. =)

Re:Isn't this an issue for the CFO

[timster]

Regardless of that article, such speculation is ridiculously absurd at this point, though by now we should be used to ridiculous speculation regarding all things Apple. Also, this sentence:

CEO Steve Jobs may be forced to resign if it is proved that he knowingly took an option grant at below market prices.

is completely false. There is nothing wrong with taking an option grant at below market prices, and that isn't the issue here at all; the issue is whether such things were reported properly. Jobs would only be at risk if it were shown that he intentionally deceived investors about the level of compensation he was getting.

My speculation? Most likely Jobs didn't determine the details of his compensation personally, and the person who did made a mistake. Options dating wasn't at the top of anyone's mind two years ago, and the impact on Apple's reported earnings is probably not much more than noise. Investors who sell now are being hasty as the situation is unlikely to change in any material way.

This WILL be a big deal at smaller companies where the options dating issue results in significant changes to the bottom line, but it's hard to imagine this being the case at Apple.