January 21, 2007 / 5:23 AM / 13 years ago

Apple posts options expenses, stands by CEO Jobs

BOSTON/NEW YORK (Reuters) - Apple Computer Inc. (AAPL.O) Chief Executive Steve Jobs received a vote of confidence from the company’s board on Friday in a much anticipated filing that also said it would take an $84 million charge for misdating stock options.

Apple CEO Steve Jobs introduces the new Apple iPod Hi-Fi, in Cupertino, California February 28, 2006. Apple Computer Inc. filed late annual and third-quarter financial reports with the U.S. Securities and Exchange Commission on Friday, making adjustments for certain stock option grants. REUTERS/Lou Dematteis

Apple’s filing with the U.S. Securities and Exchange Commission detailed results of its internal investigation over options grants and came after several days of big swings in its share price. Speculation had been rampant over what the report would say about Jobs’ role in the options controversy.

Apple shares rose about 5 percent after the filing, which repeated earlier company statements that Jobs and other managers recommended or were aware of certain inaccurate option dates, but did not financially benefit from those grants.

Apple disclosed the amount of its restatement in the filing, and admitted that thousands of stock option grants made between 1997 and 2002 used the wrong measurement date.

“The board of directors is confident that the company has corrected the problems that led to the restatement, and it has complete confidence in Steve Jobs and the senior management team,” directors Al Gore and Jerome York said in a statement.

Investors were relieved by the disclosures. “Indications are there was no wrongdoing by current senior management, including Jobs. It seems like there was much ado about nothing,” said Jim Huguet, president of Great Cos. Inc., which holds Apple shares in its $350 million portfolio.

Investors had been focused on whether the probe would taint Jobs, the driving force behind Apple’s turnaround in recent years with the launch the wildly successful iPod music players and a reinvigorated line of Mac computers.

The board’s support for Jobs should lead investors to focus on the company’s business prospects for the coming year, said Jonathan Hoopes, an analyst with ThinkEquity Partners.

“Now that the cloud is lifting I think you’ve got some great catalysts in 2007,” Hoopes said, pointing to the possible launch of an iPod mobile phone, home digital video player and upgrades to key software programs.


In all, Apple said the originally assigned dates for 6,428 grants on 42 dates were improper. Among those were two questionable grants to Jobs — dated January 12, 2000, for 10 million shares, and October 19, 2001, for 7.5 million shares.

The board originally approved the October 19, 2001, grant at a meeting on August 29, with an exercise price of $17.83.

The final terms of the grant were set on December 18, and the price was changed to $18.30. But Apple shares were trading at $21.01 on that date.

“The approval for the grant was improperly recorded as occurring at a special board meeting on October 19, 2001. Such a special board meeting did not occur,” Apple said in its filing. “There was no evidence, however, that any current member of management was aware of this irregularity.”

Apple recognized $20 million in stock-based compensation expenses for this grant, it said, reflecting the difference between the grant price and the actual stock price on December 18.

Both of those grants to Jobs were never exercised and were canceled in March 2003, the company said.

Overall, Apple said it has recognized noncash stock-based compensation expenses of $84 million after taxes.

Friday’s filing echoed much of what Apple said in October, when it cleared Jobs of any wrongdoing related to option grants, blaming two managers who it said had left the company.

Apple is among the best known of more than 160 companies caught up in the stock options scandal that has ravaged the technology industry amid inquiries into whether grant dates of stock options were manipulated to benefit executives.

Cupertino, California-based Apple’s shares were up $3.98 at $84.85 in heavy mid-day trade on Nasdaq, where it was the second most active issue.

Additional reporting by John Poirier in Washington and Sarah Coffey in New York

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