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jhedges3

macrumors regular
Sep 11, 2003
133
0
NY, NY
3> Engineering team & designers NEED to stay focused on giving us the absolute BEST product updates this year.

Is there any reason to believe that the 10-Q, or anything else including the SEC investigation itself, will, or has already, made Apple engineers and designers less focused on giving you ‘the absolute BEST product updates this year?’

I don’t see why there would be any connection. Do you believe that both of these groups within Apple would be so distracted by the investigation that they would start slacking and release sub par product updates? If there were any such possibility it would seem like a very serious threat to Apple’s ability to develop and as such they would have already taken steps to address it, from which there would likely be some evidence.

My impression, though, was that regardless of whether such a possibility exists Apple’s primary objective is not to offer you, or us, the absolute best product updates. But instead to release products, accompanied by marketing, and at such times, etc., so as to increase their chances of making money. That being their primary focus, the products they release may or may not be the absolute best with respect to how you see them.
 

jhedges3

macrumors regular
Sep 11, 2003
133
0
NY, NY
4> For Apple to have a SUCCESSFUL Spring - this SHOULD be resolved before Leopard releases ... if not we as current, longstanding, and ppl like myself salivating potential converts MUST upgrade to give Apple what it needs $$ to breeze by this without a hair touched - I may be looking too badly at this news.

Of all your points and non-points I find these ones to be the most incredible.

Why is it that the SEC investigation must be completed before Leopard release? Is there any evidence, any chain of reasoning, and any explanation for why a Leopard consumer should, or will, in any way be affected by the status of the investigation? Do you feel, for example, that in some worst case scenario existing OS X users and potential converts will be in such a state of anxiety for what may lie ahead for Apple that they’ll in significant numbers forgo any purchase of the update? I’m not convinced they have anything to do with each other, but assuming they did why couldn’t a completed investigation that leaves Apple’s image or financial status so tarnished, or leaves them so Jobs-less, that nobody would touch Leopard?

And I’m left pleasantly dumbfounded at your idea that should Apple’s Leopard release suffer from an ongoing SEC investigation longstanding salivating potential converts like yourself ‘MUST’ upgrade to give Apple the capital that it needs to get by without its hair being touched. As an aside, how is it that people like you who’ve yet to convert can upgrade to Leopard or do you mean upgrade simply in terms of switching to a better OS?

Well, I would cry tears of joy and call my mom to explain if it came out as you envisioned it. The increasingly less imperious, but increasingly more nefarious, Apple’s Leopard sales slump under consumer’s uncertainty about a looming SEC investigation. In the final our, our dearest Apple is saved by the generous and altruistic influx of capital from a small band of upgrading converts who show their resolve and unwavering support of the company by buying the OS nonetheless. I just wish that band of salivating converts could also happen to have a penchant for wearing armor say or going on walks in New Zealand or searching for lost droids, for example. It would help for them to be as mythical as possible.

Must finish my Health Valley Amaranth Flakes with unsweetened Silk and finish reading about this ‘far-out Aura concept phone’ on Engadget Mobile.
 

jhedges3

macrumors regular
Sep 11, 2003
133
0
NY, NY
The grant to Steve in December 2001 is what they are most concerned about. They are taking a while because there was falsified documents involved, and whenever you have those involved, its hard to get at the truth.

My impression from articles like this one at IformationWeek.com is that although investigators are particularly interested in the 2001 options, as you say, Jobs was cleared of any wrongdoing. And that their focus was instead on Fred Anderson, former CFO, and Nancy Heinen, former general counsel and board secretary, as that article points out.

The 2 January article quotes from a 10-Q filing:
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.​
 

jhedges3

macrumors regular
Sep 11, 2003
133
0
NY, NY
So we all wish them well, hope the distractions end soon, and that whoever is responsible goes to prison!!!! (I jest)

uh, as long as it isn't our favorite demi-god/Reality-Distortion-Field-Wizard-of-Woz, Stevie-J!! :cool:

Apple, and we the Apple-appreciating community, need Steve Jobs at the helm.... I say that as a (very happy) shareholder, by the way!!

peace,
tribalogical

I know you were being jestful, but why do we, they, need Jobs?

If he's found guilty of a crime he should punished accordingly.

Unless the dreams of someone like Aubrey De Grey come true relatively soon, and humans defeat aging, Jobs obviously cannot be at the helm forever.

That being said, is it really so bleak that all of you believe that world is without anyone who could ever follow him. And if that’s true what are we to do? What will the post-Jobs world be like? Will there be an Apple at that point?

It’s like saying there will never be another Dan Marino or another Johnny Unitas or another Brett Favre or another Peyton Manning. But the very fact that we can list so many of them means that, just as with computer execs, the future tends to have its own set of greats.

For that not to be true with whoever is at the helm of Apple, would be to say that some general notion of probability doesn’t apply to Apple. Great CEOs, like great anything, are rare events perhaps, but they’re not necessarily one-offs.
 

shamino

macrumors 68040
Jan 7, 2004
3,443
271
Purcellville, VA
The reason companies don't just hand shares to employees is that they would need to buy the shares and pay the market rate and they would dilute the price of existing shares.
That would be "or". If you buy the shares on the market, then you pay a higher price for them, but you don't dilute anything. In fact, buying-back shares (whether to hold them or give them to employees) will boost the price. Or you can issue new shares (typically from a pool allocated in advance with shareholder approval), which costs little-to-nothing, but does dilute existing shares.
 

shamino

macrumors 68040
Jan 7, 2004
3,443
271
Purcellville, VA
Between this and Vista, I see AAPL dropping to <$40 by July.
Can I buy your shares for <$40 in July?

Nobody cares about Vista. The only reason anybody will have it will be because Dell and HP are going to stop selling PCs with anything else.
Leopard is not going to have a huge impact on Apple's share of computer sales. Yeah, a lot of us will upgrade (I know I will), but unless some serious flaws in Vista come to light ...
Of course some serious flaws will come to light. Every Microsoft OS has been chock full of serious flaws. That's why no corporate IT department trusts any Microsoft OS until after two or three service packs have shipped.
Why do you need stock-options for that? Seriously? Why couldn't the same thing be achieved by giving the employee a bunch of shares in the company, instead of using some options-shenanigans?
If I'm an employee, and I just get a block of stock, I turn around and sell the shares immediately. It's no different from a cash-bonus. Except that I have to fill out several extra forms at tax time (normal income for the value of the shares granted, capital gain/loss for the difference between the issue price and the sale price, plus the possibility of the Alternative Minimum tax kicking in.)

With an incentive-option plan, the shares vest over time. If I want the benefit, I have to remain an employee, and the company has to do well during that time.

And yes, they could issue shares with some strings that prevent me from selling them. But that would be even worse. Then I'd owe all the taxes and I'd have no ability to actually pay that tax.
Those things could be worked around. The employee might be allowed to sell enough shares to pay the relevant taxes. Or what if the employer handled the taxes for him? Or what if the shares would be placed in a trust, where they would be kept for the employee, but the employer wouldn't own the shares himself for severla years?
If think you know of a company that would actually do this, I have a bridge to sell you.
 

Evangelion

macrumors 68040
Jan 10, 2005
3,374
147
And yes, they could issue shares with some strings that prevent me from selling them. But that would be even worse. Then I'd owe all the taxes and I'd have no ability to actually pay that tax.

I did say that that could be worked around.

If think you know of a company that would actually do this, I have a bridge to sell you.

You are missing the point. You are basically saying "no-one does that". But that is not the same as "That couldn't be done". It could be done. Besides, there are lots of companies around the world which are owned by their employees. Somehow they manage to do it.
 

gwangung

macrumors 65816
Apr 9, 2003
1,113
91
*sigh*.... Like I already said, those taxes could be handled. Everybody makes it sound like those taxes make something like that utterly impossible, and we therefore absolutely NEED options. I mean, if you exercise those options, you get hit by taxes, right? So where is the difference here? You get worthless options, no taxes. You exercise those options, and you get hit by taxes. You get shares in the company, you get taxed. Regardless of what you do (unless you let those options go void), you get taxed. Is this a case of "I'd rather get taxed sometime in the future, instead of getting taxed right now"?



And because of those options, we are having all kinds of problems. Thanks a lot!


No, you DON'T understand. That's pretty clear. You keep on saying that "these things can be worked around." Um, hello? That's how options got granted in the FIRST place!!

I think you should leave the accounting issues to folks who understand a little more about it than you do.
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,909
1,496
Palookaville
Speaking from a UK perspective I think this investigation is nuts.

Just like the way the government went out to destroy Microsoft or AT&T all those years back was nuts. I couldn't understand looking from the outside and into your US fishbowl why your government conciously wanted to kill a company that ruled in the WORLD of computers.

Assuming you understand UK corporate law (which I won't assume), you certainly don't have a nodding acquaintance with US law. These laws are all about proper disclosure of financial activities to stock holders. It's about companies correctly reporting expenses. I suspect the UK has similar accounting disclosure laws.

As for Microsoft, that of course is an entirely different matter. Even so, you might pause to consider that the US antitrust action against Microsoft came essentially to naught. It was the EU that really swung the hammer.
 

Evangelion

macrumors 68040
Jan 10, 2005
3,374
147
No, you DON'T understand. That's pretty clear. You keep on saying that "these things can be worked around." Um, hello? That's how options got granted in the FIRST place!!

I think you should leave the accounting issues to folks who understand a little more about it than you do.

Why yes, I do get it just fine. And fact remains that these problems are due to optiuons, period. Nothing would have happened if they had not used options. Options bring with them problems like we are facing right now (backdating etc.)

"leave this to folks who understand little more about it than you do".... And end up with a problem that might lead to SJ leaving Apple? Yeah, why don't we do just that? After all, it was those people "who know little bit more" who caused this whole issue in the first place! Yes, they clearly know what they are doing. The fact that they are ruining everything is just a coincidence!

Like I said: the sooner we get rid of options, the better off we will all be. Options just make thing more confusing, that is a fact. And what exactly is there so confusing about giving employee X amount of shares, and then the employee selling some of those shares to pay for the relevant taxes? Are you REALLY saying that options are simpler than that?
 

Evangelion

macrumors 68040
Jan 10, 2005
3,374
147
Options are not the problem. Properly accounting for them is the problem.

And you wouldn't have those problems if you just gave the employees some shares, instead of doing some backdating-shenaningans with options. Why are we looking for complicated solutions here? And why do we need options? So we could tie the employees compensation to the performance of the company? Well, you could do that with just shares, no options needed. Or how about setting aside portion of the company's profits to be distributed to employees as bonuses? Isn't that the simplest solution possible? Why are we looking at complicated "solutions" to this particular "problem"? Solutions that could bring huge damage to Apple?

Don't want to play around with shares? Well, take 10% of company's annual profits, and distribute that among the employees as bonuses. That way the employees compensation is directly related to the performance of the company.
 

gwangung

macrumors 65816
Apr 9, 2003
1,113
91
Like I said: the sooner we get rid of options, the better off we will all be. Options just make thing more confusing, that is a fact. And what exactly is there so confusing about giving employee X amount of shares, and then the employee selling some of those shares to pay for the relevant taxes? Are you REALLY saying that options are simpler than that?

Yes.

And, no, you DON'T understand the problem (because it's been described at least three times). What part of grant-at-$55-get-taxed-at-$55-but-only-worth-$22 don't you get????? You can't hold any of the stock (pretty much have to cash out that year), it's no different than outright cash bonuses, you get worse tax implications and you don't encourage people to stay with a company.
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,909
1,496
Palookaville
And you wouldn't have those problems if you just gave the employees some shares, instead of doing some backdating-shenaningans with options. Why are we looking for complicated solutions here? And why do we need options? So we could tie the employees compensation to the performance of the company? Well, you could do that with just shares, no options needed. Or how about setting aside portion of the company's profits to be distributed to employees as bonuses? Isn't that the simplest solution possible? Why are we looking at complicated "solutions" to this particular "problem"? Solutions that could bring huge damage to Apple?

Don't want to play around with shares? Well, take 10% of company's annual profits, and distribute that among the employees as bonuses. That way the employees compensation is directly related to the performance of the company.

Yes.

And, no, you DON'T understand the problem (because it's been described at least three times). What part of grant-at-$55-get-taxed-at-$55-but-only-worth-$22 don't you get????? You can't hold any of the stock, it's no different than outright cash bonuses, and you don't encourage people to stay with a company.

Well, I think you're both on the wrong track. Properly accounting for options isn't difficult or complicated -- it just needs to be done. Granting options, even back-dated options, doesn't by definition involve any sort of shenanigans. More importantly, I don't know how you "do away" with options grants, even if you wanted to.

Outright stock grants are also not a bad alternative. Note that Steve Jobs exchanged his options for stock.
 

Gasu E.

macrumors 603
Mar 20, 2004
5,029
3,138
Not far from Boston, MA.
This would be horrible for employees because of the tax laws. This is one of the reasons the incentive stock option (ISO) structure was created. Under your scheme and the current tax laws the employee would be liable to pay taxes (cash out of his/her pocket) on the value of the shares received. They then could not sell them to cover the cash flow and if the stock tanks there are out the cash.

ISO's avoid this while preserving the value for the employee.

You are correct, but let's turn this on its head. The current tax laws regarding ISOs vs. share grants induce behavior that is counter to the interests of stockholders.
 

Gasu E.

macrumors 603
Mar 20, 2004
5,029
3,138
Not far from Boston, MA.
Yes.

And, no, you DON'T understand the problem (because it's been described at least three times). What part of grant-at-$55-get-taxed-at-$55-but-only-worth-$22 don't you get????? You can't hold any of the stock (pretty much have to cash out that year), it's no different than outright cash bonuses, you get worse tax implications and you don't encourage people to stay with a company.

Options encourage excessive risktaking by management, counter to the interests of stockholders. Any textbook on corporate finace will confirm this.

One way to illustrate this is through the Black-Scholes option pricing formula, generally accepted as the best way to value options outside of direct market pricing. According to the formula, the value of an option increases according to the volatility of the underlying security. There is no other "predictive" element in the formula.

An intuitive way to see this is to imagine that there is a stock with current value $10, strike price of $10, and the manager has the choice of two behaviors. With the first behavior, the stock will hold steady at $10. with the second, the stock will oscillate between $1 and $19. In each case the stock has the same expected value, but the option is worth much more in the oscillating case.
 

gwangung

macrumors 65816
Apr 9, 2003
1,113
91
Outright stock grants are also not a bad alternative. Note that Steve Jobs exchanged his options for stock.

Think that's more advantageous for higher ups. For folks further down the totem pole, I think options are more attractive.

Now, if you want to argue that you want to restrict options to non managerial people because they're are more valuable and useful for lower level employees, I;m not sure I'd disagree...
 

Evangelion

macrumors 68040
Jan 10, 2005
3,374
147
Yes.

And, no, you DON'T understand the problem (because it's been described at least three times). What part of grant-at-$55-get-taxed-at-$55-but-only-worth-$22 don't you get?????

Dude, take a frigging chill-pill. I have (repeatedly, I might add) said that yes, you might be hit by taxes if you are granted shares. So I do "get it"! Sheesh! What part of "Take X worth of shares, sell some of those shares to pay for the related taxes" do YOU not understand???????? Or, if you really believe in the company, keep all of the shares, and pay the taxes from your own pocket. If the employee is given shares that are worth 10.000 dollars, then he gets taxed at 10.000 dollar, right? It's not like he gets shares worth 10.000 dollars, yet Uncle Sam taxes him as if they were really worth 30.000 dollars.

Do I need to draw you a frigging picture or something? Do I need to take out my frigging cluebat?

Yes, I did say in my oroginal message that "the employee might be required to not sell the shares for several years", but that was merely one idea floated around, and now you are hanging on to that comment like a frigging leech.

you get worse tax implications and you don't encourage people to stay with a company.

How, exactly? Because they get hit by taxes? Well, they get hit by taxes in case of options as well, the only difference is WHEN they get hit by taxes: right away, or some point in the future. Options are not tax-free, now are they? They might be when they are granted, but at that point they are not worth anything to the employee. They are just paper-money, so to speak. When the employee cashes in those options, he gets hit by taxes. So where is the difference?
 

gwangung

macrumors 65816
Apr 9, 2003
1,113
91
How, exactly? Because they get hit by taxes?

Types of taxes, whether they pay long term capital or income. If granted stock, they get taxed at the higher rate immediately. Granting options means that while you get taxed upon exercise of options, the profit may be taxed at the capital gains rate (which is lower) if you hold it long enough. Also, you can spread the tax burden over a longer period of time. Might not be as beneficial for execs, but is probably easier for folks lower on the totem pole.
 

EagerDragon

macrumors 68020
Jun 27, 2006
2,098
0
MA, USA
Seems this is the cause for the delays

It does seem that they still trying to come up with a formula, see article below::apple:
----------------
SEC finalizing penalties for options backdating
By Brooke Masters in New York and Jeremy Grant in Washington

Financial Times - February 6, 2007
(c) 2007 The Financial Times Limited. All rights reserved


The Securities and Exchange Commission is nearing completion of a formula for punishing companies that improperly backdated stock options, clearing a logjam that has held up dozens of cases and frustrated its enforcement staff.

The SEC's staff negotiated a tentative settlement in the first stock options case, against Brocade, the world's largest maker of data storage switches, nearly a year ago, but the deal ran into trouble because commissioners couldn't agree on how large a penalty to impose.

Other cases have backed up because the enforcement staff did not want to suggest penalties until they had a better sense of what the commission would decide in the Brocade matter, sources familiar with the cases said.

The five commissioners are philosophically divided on the issue, but they agreed last year that penalties should be closely related to the financial benefit the company reaped from its misbehaviour.

Now, SEC economists are putting finishing touches on a complex model that measures the size of the benefit companies reaped from improper backdating of options. The Brocade case could come up for a vote in six weeks or two months and other cases could follow in quick succession.

The SEC is investigating more than 130 companies for backdating. The penalties fight has not affected efforts to punish corporate executives involved in the backdating because their personal economic benefit is easy to measure and fining them does not cause collateral damage to investors, SEC officials said.

The commission often wrestles with the first case in a new area because it is trying to lay down a model for other settlements. In 2003, the SEC drew criticism for settling its first market-timing cases with Putnam Investments without announcing a firm penalty because it was waiting for an economic study of the harm to investors.

The stock options divisions also reflect a larger split at the commission level. Two Republican commissioners oppose large fines because they could hurt shareholders who were already victims. Two Democrats argue that penalties deter misbehaviour and note that the money goes into a "fair fund" that is distributed to investors.

Christopher Cox, SEC chairman, has sought consensus based on whether a corporation reaped economic benefits, underscoring the need for a model in the stock options cases

Asked whether the commissioners were divided on stock-options penalties, Mr Cox said last week, "That's a case by case determination and in that respect not different from other cases generally."

The commission remains divided on penalties in cases involving issues other than options backdating. One source familiar with the matter estimated that up to 25 settlements - most not involving stock options - have been negotiated by the staff but are awaiting commission approval.

The SEC's stock options work also has been slowed down because it has to coordinate with the Justice Department, which is putting together criminal cases. One high-ranking source said, "We are not doing this in a vacuum. We are sometimes part of a larger government response in which case that's another overlay of complication."
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,909
1,496
Palookaville
Thanks for the info. The implications for Apple aren't entirely clear, but this suggests that at least some of the commissioners won't vote for penalties which harm investors. Forcing Steve out would certainly fall under that category. Determining how a company benefited from improper disclosures seems like an impossible task, though.
 
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