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View Full Version : Apple: Earning must be restated, Stock drops 6%


RBMaraman
Aug 3, 2006, 08:32 PM
LOS ANGELES, Aug 3 (Reuters) - Apple Computer Inc. said on Thursday it would likely need to restate earnings and will delay filing its quarterly report because of additional irregularities it found in its accounting of stock options and its shares fell 6.6 percent.

Apple first announced on June 29 that it was conducting an internal probe into irregularities related to stock option grants, hired an independent counsel to conduct its own investigation of the irregularities and notified the U.S. Securities and Exchange Commission.

Apple, maker of the iPod digital music player and Macintosh computer, is now among the most high-profile companies caught up in a stock options scandal that has swept through the technology industry. The SEC has more than 80 investigations underway to determine if companies manipulated the prices of stock options given to executives.

Cupertino, California-based Apple will likely need to restate results to record noncash charges for compensation expense relating to past stock option grants. Apple said it had not determined the amount of the charges, resulting tax and accounting impacts, or which periods may require restating.

Apple also said in a SEC regulatory filing Thursday that all financial communications issued since Sept. 29, 2002, should not be relied upon. The irregularities are related to the issuance of stock option grants made between 1997 and 2001.

"We are refraining from any further comments until the independent investigation is concluded," said Apple spokesman Steve Dowling on Thursday.

http://today.reuters.com/news/articleinvesting.aspx?type=marketsNews&storyID=2006-08-04T005238Z_01_N03373355_RTRIDST_0_TECH-APPLE-UPDATE-2.XML

[EDIT] Title should be "Apple: Earnings must be restated, Stock drops 6%" *Note to self - Check spelling in titles*

swingerofbirch
Aug 3, 2006, 10:19 PM
I was just about to post this---good catch!

I am pretty annoyed. I bought Apple a while ago, and with its stocking going up today had finally broken even, but I thought I'd hold onto it until it hit 75.

Looks doubtful with this scandal. Obviously Apple's choices are hurting its stock-holders. How can shareholders hold Apple responsible for this?

I am in no way a high-roller. Apple is the only stock I ever bought, and I only bought 8 shares which is all I could afford. I sort of learned my lesson about the stock market and want out as soon as I can break even including the cost of selling the stock.

I saw Warren Buffet being interviewed the other day on the Charlie Rose program and he kept talking about how important it was to know the business you were buying into and trust the people in charge.

Is there any way as an investor you can predict something like this though? I consider Apple to be fairly reputable, but with this and the labor in China, I don't think that's as true of the financial end of things.

WildCowboy
Aug 3, 2006, 10:33 PM
It's partly Apple's fault, but it's partly just the way business was done back then. Lots of companies are realizing that they did things incorrectly, but it's more a matter of interpretation of the regulations that an outright scandal.

bousozoku
Aug 3, 2006, 11:22 PM
It's partly Apple's fault, but it's partly just the way business was done back then. Lots of companies are realizing that they did things incorrectly, but it's more a matter of interpretation of the regulations that an outright scandal.

Exactly, the rules didn't specify much and the suggestions by accounting groups didn't say much more until the government stepped up and made rules.

Apple's stockholders were early on the bandwagon to demand reform.

Besides, the stock recovered almost completely after having dropped after hours today.

WildCowboy
Aug 3, 2006, 11:31 PM
Exactly, the rules didn't specify much and the suggestions by accounting groups didn't say much more until the government stepped up and made rules.

Apple's stockholders were early on the bandwagon to demand reform.

Besides, the stock recovered almost completely after having dropped after hours today.

Actually that quote was from the regular post-market trading that closed at 6:30 EDT, just before the news was released. The super-extended ECN data from after the news release is what shows the over 6% drop.

ZoomZoomZoom
Aug 4, 2006, 01:20 AM
Hope WWDC 2006 brings out something good. I know what I want to buy next, and I was going to move my money out of Apple right after WWDC. Still going to do that, but this really sucks. :(

swingerofbirch
Aug 4, 2006, 01:26 AM
My dad had told me to sell...arggg...I guess it doesn't matter if I am willing to hold onto it a bit longer...I would like to see the stock split so I'd have more potential for gains, since I only have 8 shares...I don't know much about the stock market....does anyone know at what point they would split the stock?

rdowns
Aug 4, 2006, 03:30 AM
Here's the after hours drop.

WildCowboy
Aug 4, 2006, 12:41 PM
My dad had told me to sell...arggg...I guess it doesn't matter if I am willing to hold onto it a bit longer...I would like to see the stock split so I'd have more potential for gains, since I only have 8 shares...I don't know much about the stock market....does anyone know at what point they would split the stock?

If you "don't know much about the stock market," you shouldn't really be in it. They'll split the stock when it's at a comfortably high level and they see much more upside to it...in other words, they'll split it when they split it. And in this day and age when people (such as yourself) can buy odd lots of shares, splitting has essentially no effect on the "potential for gains" in the stock. Most of the bump in stock price you see at a split (if you see it at all) is due to the public perception that the company is confident enough in its forward-looking projections that don't see a major drop in the stock price...that bump would happen anyway over time, just not all at once.

mac-er
Aug 4, 2006, 08:10 PM
I'm surprised there isn't bigger discussion about this.

These actions could lead to the departure of Steve Jobs from Apple (e.g., if the SEC finds he acted inappropriately, etc)

http://money.cnn.com/2006/08/04/technology/apple_options.reut/index.htm

sushi
Aug 4, 2006, 08:16 PM
My dad had told me to sell...arggg...I guess it doesn't matter if I am willing to hold onto it a bit longer...I would like to see the stock split so I'd have more potential for gains, since I only have 8 shares...I don't know much about the stock market....does anyone know at what point they would split the stock?
Great owning stock.

You might want to look into a good capital appreciation or index mutual fund that allows you to make periodic purchases. Great way to learn about the market while accumulating wealth.

As for stock splits, it is difficult to tell. I would say before Apple reaches 100 they will split. My guess would be in the sustained 75-85 range.

xPismo
Aug 4, 2006, 08:27 PM
I'm surprised there isn't bigger discussion about this...

As am I. This story will be very interesting as it pans out.

i.Feature
Aug 4, 2006, 08:36 PM
I am in no way a high-roller. Apple is the only stock I ever bought, and I only bought 8 shares which is all I could afford. I sort of learned my lesson about the stock market and want out as soon as I can break even including the cost of selling the stock.

Playing stocks: Which is buying hoping for short term gain is always a big gamble. You should only buy a stock if you're prepared to be in it for the long hall. Companies, all companies, go through ups and downs. But most solid company's stocks appreciate over long periods of time. Not saying you should never sell for short term gain. Or if the company is really dying. But you should always be prepared to stick it out.

jhu
Aug 4, 2006, 09:35 PM
Playing stocks: Which is buying hoping for short term gain is always a big gamble. You should only buy a stock if you're prepared to be in it for the long hall. Companies, all companies, go through ups and downs. But most solid company's stocks appreciate over long periods of time. Not saying you should never sell for short term gain. Or if the company is really dying. But you should always be prepared to stick it out.

i still hope my 5000 shares of iridium are still worth something...

Senbei
Aug 5, 2006, 02:25 AM
Here is an ex-Apple employee (director of Federal sales) blog which covers some ground on Apple's internal corporate culture and how it might be a contributor to compensation issues including options. Guess it is up to the reader to decide how much is truth and how much is from an ex-employee with an axe to grind. However, Apple has an extensive history of being internally dysfunctional as an organization (if you've read some of the various Apple history books out there; the Orchard at Lowend Mac (http://lowendmac.com/orchard/index.html) has some condensed articles covering various parts of the Sculley (http://lowendmac.com/orchard/06/0222.html), Spindler (http://lowendmac.com/orchard/06/0406.html), and Amelio (http://lowendmac.com/orchard/05/1221.html) eras; the Peter Principle was really in full force during the Spindler era).

http://viewfromthemountain.typepad.com/applepeels/

To be honest, it doesn't sound like an exaggeration (corporate culture wise where there are fiefdoms, dysfunctional management, favoritism, etc) as I've had similar experiences where various departments don't really even communicate with each other (because each manager is more concerned about protecting their own turf, budgets, pet projects, agendas) or where upper management and execs bend the rules as far as possible and use their blame shield to deflect attention elsewhere when something goes awry. Those who don't brown nose however have to deal with all sort of dilemmas and it seems this person was no exception in either being shown the door for making too much waves (or leaving on their own accord on the ground of principles).

IJ Reilly
Aug 5, 2006, 12:03 PM
I'm surprised there isn't bigger discussion about this.

These actions could lead to the departure of Steve Jobs from Apple (e.g., if the SEC finds he acted inappropriately, etc)

http://money.cnn.com/2006/08/04/technology/apple_options.reut/index.htm

That's a very big "could," and a very doubtful outcome. Remember, hiring/firing the CEO is entirely up to the Board of Directors and it's difficult to imagine a scenario where they'd feel compelled to fire Steve Jobs for accepting stock options the board granted him.

MacVault
Aug 6, 2006, 10:19 AM
The whole reason for this financial problem is cuz the only real personal finance manager Steve Jobs can use on his Mac is the fricken stupid Quicken for Mac - it sucks major a$$ compared to the Windows version and Intuit should be ashamed of themselves.