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Irregularities at Apple: financial
Posted by: samintx
Date: June 30, 2006 04:42AM
NEWS ALERT
from The Wall Street Journal
I'm not sure the URL will compute for readers but I'll check and post the remainders of the article if it doesn't. Don't know exactly what "grants" means in this context.

June 29, 2006

Apple said an internal investigation found options "irregularities" related to
some grants made between 1997 and 2001. One of the grants was to CEO Steve Jobs,
but the company said it was subsequently canceled. Apple said it has notified the SEC.

FOR MORE INFORMATION, see:
[online.wsj.com]
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Re: Irregularities at Apple: financial
Posted by: samintx
Date: June 30, 2006 04:45AM
Apple and CA
Report Problems
In Options Grants

By JAMES BANDLER, NICK WINGFIELD and WILLIAM M. BULKELEY
June 30, 2006; Page A3

Apple Computer Inc. and CA Inc. became the latest companies to report potential problems with their stock-option programs.

Apple, Cupertino, Calif., announced yesterday that an internal investigation discovered "irregularities" related to stock options between 1997 and 2001, including a problematic grant to Chief Executive Steve Jobs. The company said the grant to Mr. Jobs was canceled in March 2003 and resulted in "no financial gain."

MORE ON OPTIONS


• Text of Apple's June 29 statement

• Options Scorecard: Companies under scrutiny

• Perfect Payday: Complete coverage

Apple said it has formed a board committee of outside directors to investigate. The company didn't say whether any other executives received questionable grants or whether the company would need to take any charges for the irregularities.

Separately, CA said it isn't able to provide audited results for its fiscal year ended March 31 because of newly discovered problems with reporting of options dates from 1997 to 2001.

The announcements come amid broadening probes over the timing of executive options. More than 50 companies have been caught up in federal inquiries by either the Securities and Exchange Commission, prosecutors or both concerning possible backdating or timing grants ahead of favorable news. At least a dozen officers and directors have been forced to resign or have been fired amid internal inquiries into their companies' options-grant practices.


An option gives its holder the right to buy shares at an exercise, or strike, price -- typically the market value of a company's stock on the date of the award. Any subsequent rise in the market price of the shares allows the option holder to cash in the option and pocket the difference between the exercise and market prices.

Apple declined to say which of the grants to Mr. Jobs were problematic. The company's securities filings show it made at least one propitious grant to Mr. Jobs. That grant of 10 million shares was dated in January 2000 at the stock's lowest closing price for that month. The stock rose 30% in the 20 trading days following the grant.

Apple spokeswoman Katie Cotton said the internal investigation was "undertaken in response to general industry concerns about the historical option granting process at a number of companies."

In a statement, Mr. Jobs said the company was "proactively and transparently disclosing what we have discovered to the SEC."

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Get alerts for breaking news -- such as Fed moves, major world events and big mergers -- delivered straight to your desktop. Alerts will appear in a small window on your screen, much like an instant-messaging window. See a sample and get more information.The problems at CA appear to be an unusual variant on misdating options. The big software maker, which twice previously postponed releasing its results, said that during that time it sometimes failed to inform employees of option grants for as long as two years after they were awarded. It said that because of accounting rules, that means it may have to restate earnings reports for the past three years. "Delaying the filing is our only option until we understand the full impact of the legacy stock-option issue and any potential financial adjustments," said John Swainson, president and chief executive.

A person familiar with CA's internal review said the company discovered that in the late 1990s the board had a practice of authorizing a pool of options to be awarded to employees by management. During that period, its stock was rising steadily, and when the company decided to give an employee an award from the pool, the strike price was usually below the trading price. Although in those days, the value of the option at the original strike price wasn't recorded as a cost, the difference between the strike price and the market price at the time the employee got the award should have been recorded as a noncash expense by the company. CA said it hasn't determined whether there will be any tax costs as a result of the misdating.

The person familiar with the company's analysis said that most of the options didn't vest for several years after they were granted, so it appears that employees didn't benefit from the options, since the company's stock fell sharply after 2000.

CA said that as a result of the awards, it may have to recognize increased noncash stock compensation expense of $40 million to $100 million for 2002 through 2004, and less than $20 million in 2005 and 2006.

CA, Islandia, N.Y., said it also discovered that it had understated certain revenue related to subscription pricing for software in 2005 and previous years, which may result in a restatement. The adjustment means that 2005 revenue will rise by about $40 million, but revenue will be reduced by that amount between now and 2011.

CA said that based on preliminary results, it had a net loss in the fourth quarter of $36 million, or six cents a share, compared with net income of $16 million, or three cents a share, a year earlier. It said revenue rose 3% to $947 million.

Also yesterday, Equinix Inc. and Intuit Inc. said they had received options-related subpoenas from the U.S. attorney's office for the Northern District of California. Both Equinix, of Foster City, Calif., and Intuit, of Mountain View, Calif., previously disclosed options inquiries by the SEC.
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Re: Irregularities at Apple: financial
Posted by: Jimmypoo
Date: June 30, 2006 07:08AM
AppleRon!

Hang him!

no wait.... don't do that until I get my new machine. Then just give me his jet. That will teach him!
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Re: Irregularities at Apple: financial
Posted by: cbelt3
Date: June 30, 2006 08:01AM
This really isn't anything new. The SEC recently 'reinterpreted' the rules and started biotching at companies. Most companies who granted stock options have this 'problem'. It's not an 'illegal' thing because there are no laws on this one, just a reinterpretation of some accounting rules.

Nothing to see here, move along.
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