At least the IDCC Executives are above this turmoil. The stock is bound to go much higher now that I have sold my shares. I feel almost as tormented with the money I left on the table from today's gain than the 10 point drop. I guess I have to suck it up, and figure out a good entry point.
AP
Apple Warns of Profit Restatement
Thursday August 3, 10:04 pm ET
By Michael Ledtke, AP Business Writer
Apple Warns It May Have to Revise Profits Going Back to 2002 Because of Stock Option Trouble
SAN FRANCISCO (AP) -- Apple Computer Inc. warned Thursday that it may have to revise its profits dating back to 2002 in a worsening stock option scandal that has cast a harsh light on Silicon Valley's compensation practices.
ADVERTISEMENT
Without providing specifics, the Cupertino, Calif.-based maker of Macintosh computer and iPod music players said it had uncovered enough evidence of mishandled stock options to raise doubts about the accuracy of financial statements dating back to Sept. 29, 2002.
During this stretch, Apple has enjoyed one of the most prosperous periods in its 30-year history. Fueled largely by steadily rising sales of its ubiquitous iPod, Apple has reported $3.1 billion in profit during the past four years.
Apple first raised a red flag about the way it accounted for stock options in late June when it announced an internal investigation into a series of "irregularities."
Some of the nettlesome stock options were given to Steve Jobs, Apple's renowned chief executive, but he voluntarily canceled those in 2003 before cashing them in.
After digging deeper, Apple uncovered enough new problems to prompt the company to hire an outside lawyer to take over the investigation and notify the Securities and Exchange Commission about its findings.
Apple hopes to complete its accounting review as quickly as possible, said company spokesman Steve Dowling. In the meantime, Apple may miss a deadline for filing its latest quarterly report with the SEC.
The developments, announced several hours after the stock market closed, threaten to rattle investors, based on how Wall Street has punished other companies that have recently disclosed potential accounting problems caused by stock option improprieties.
Apple shares gained $1.43 Thursday to close at $69.59 on the Nasdaq Stock Market, then fell 6.6 percent to $65 in aftermarket trading on the electronic INET exchange. The company's market value has increased by about $55 billion since September 2002, as its stock price rose by nearly 10-fold.
More than 60 other companies across the country are grappling with similar stock option headaches, but Apple is by far the most prominent of the lot to acknowledge trouble so far.
While Apple hasn't explained exactly how it mishandled stock options, most of the problems at other companies so far have revolved around "backdating."
Under this practice, insiders try to make the rewards more lucrative by retroactively pinning the option's exercise price to a low point in the stock's value. Usually, a stock option's exercise price coincides with the market value at the time of a grant to give the recipient an incentive to drive the price higher.
If companies backdate options without accounting for the move, it can cause profits to be overstated and taxes to be underpaid.
The financial manipulation also exposes companies to possible fraud charges that could trigger civil fines and even criminal cases.
The U.S. Justice Department has already brought criminal charges against Brocade Communications Systems Inc.'s former CEO, Gregory Reyes, and is actively investigating other cases. Reyes, who hasn't yet entered a plea in the case, is free on a $2 million bond.
More than 20 of the companies entangled in the stock option imbroglio are in Silicon Valley, where the incentives first became a staple of compensation packages for rank-and-file employees as well as top executives.
As high-tech stocks soared during the dot-com boom of the 1990s, workers began to clamor for even better stock option packages in pursuit of a big jackpot. That hunger for ever-more lucrative stock options is believed to have driven many Silicon Valley companies to resort to backdating as they tried to recruit and retain workers.
To properly account for backdated stock options, companies generally have to recognize more expenses than they originally recorded on their books. Making that adjustment can erase a substantial amount of profit.
In the past month, Mountain View, Calif.-based Mercury Interactive Corp. has wiped out more than $530 million of its past earnings because of stock option backdating. While it recalculated its profits, Mercury also missed SEC filing deadlines, causing its stock to be de-listed from the Nasdaq.
Although the debacle initially battered Mercury's stock, the shares bounced back last week when Hewlett Packard Co. announced it was buying the business software maker for $4.5 billion.
AI
