Apple feels heat from stock options spotlight
By Colleen Taylor -- EDN, February 2, 2007
Despite riding high on robust financial reports, Apple Inc. has been feeling the heat from a growing federal spotlight on its stock option granting history.
In a delayed report the company filed today with the Securities and Exchange Commission (SEC), the Cupertino, Calif.-based consumer electronics maker disclosed that it had received additional informal requests for documents and information relating to stock option grants made to CEO Steve Jobs and others.
Apple minced no words on the effects the investigation had on its business. "The resolution of these matters will be time consuming, expensive and will distract management from the conduct of the company's business," Apple said in the SEC filing. "Unfavorable results of legal proceedings could adversely affect the company's results of operations … which could harm its business, financial condition, results of operations and cash flows."
Apple's stock option woes date all the way back to June 2006, when the company admitted that an internal investigation found irregularities related to the issuance of certain stock option grants made between 1997 and 2001, and that one of the grants had gone to Steve Jobs. In October, Apple's former CFO Fred Anderson left the company when his participation in the scandal came to light. Anderson, who served as CFO from 1996 until 2004, informed the company when the results of its internal review were announced that he believed it was in Apple's best interests that he resign from its board of directors at that time.
And the company's past came back to haunt it in a very palpable, very expensive way in December, when Apple announced it would incur a whopping $84 million expense as a result of illegal backdating evidence it found in its internal investigation.
At least Apple can take solace in the fact that it is far from alone in its stock options-related troubles. In recent months, industry heavyweights Broadcom, Rambus and KLA Tencor have each taken hundreds of millions of dollars in charges for their illegal backdating histories.
