Filed under: Apple Corporate, Apple Financial, Bad Apple, Apple
Apple may restate earnings as far back as 2002
I'm no stock market maven, but something tells me this isn't good. It would seem that Apple's internal audits have found some 'irregularities' in the way the company handed out options. It boils down to mispricing, I believe, so that people could avoid paying huge taxes on their options.Apple has postponed filing with the SEC and may restate earnings going as far back as September 2002. As of this posting it looks like Steve Jobs isn't involved with this, but that still doesn't make the situation a good one. If you want to hear from someone who knows what they are talking about read this post on our sister blog, Blogging Stocks.
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Reader Comments (Page 1 of 1)
Rob Olliges said 3:29PM on 8-04-2006
Buying opportunity!
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Nick said 3:41PM on 8-04-2006
The next question I have is "restate by how much?"
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Aaron Adams said 3:44PM on 8-04-2006
Gloom and doom, gloom and doom...
How about we wait until we have solid numbers and more completely detailed and disclosed facts from the special council investigating before we declare this bad, or declare a massive revolt from stockholders (based on one angry e-mail)? The fact that Apple is disclosing this itself and not covering it up, the fact that the SEC isn't involved, and the fact that Steve Jobs immediately cancelled options that weren't completely kosher are good indicators that this isn't a scandal as much as it's an accounting error, plain and simple. Think about all of the government regulations that have been put in place in the last several years, and then imagine the job of any accounting, finance, or legal people who have to keep up with them. Is it a surprise that some numbers have to be revised?
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ATL said 3:47PM on 8-04-2006
The 'irregularities' were not tax avoidance schemes. Instead, they involved backdating employee stock options (ESOs) so that the employee could immediately realize huge gains. Let's say Apple granted you an option today, and today, AAPL is trading at $67. The exercise price on those options should be $67. However, if Apple backdated the option to July 15, the exercise price would be $52 (the closing price on that date). Thus, if Apple backdated the option, you would see a gain of $15 a share immediately. That's what was happening, at Apple and across corporate America.
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Ike582 said 5:42PM on 8-04-2006
#4, nice description and totally correct.
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randy said 6:36PM on 8-04-2006
Yeah, restating isn't good. We had to do it at the company I work for and our stock has never really recovered. Now, granted, I work for a small company and there were also other things that may have attributed to the decline in price... but it cost the company wads of cash and about a year of working 10 - 12 hour days, 7 days a week for nearly a year (not me personally, I work in IT). And we only went back like 2 years on our restatement. The SEC did get involved and we were actually close to being de-listed, in fact our stock symbol had the 'E' tacked onto the end of it durring the restatement period. Apparently, the SEC doesn't like it when you miss the filing period AND the extension they give to file... who knew? :-
I'm sure Apple will handle this as quickly as possible and they can probably afford to shell out quite a bit of cash to hire an outside firm to handle all the dirty work.
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Andrew said 7:16PM on 8-04-2006
This isn't going to be a problem in the long-run, because it means that all of th e finantial information from 2002 on is okay. Someone call and ask Jim Cramer. :-D
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Andy said 11:06PM on 8-04-2006
#7, no. It means that everything AFTER 2002 is suspect.
This ain't good. Not reporting within a certain timeframe means AAPL risks being de-listed from the NASDAQ. Not likely to happen in Apple's case, but it could.
Worse, this news is a sign of financial corruption within Apple Computer, Inc.
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ollyt said 5:09AM on 8-05-2006
i own Shares in apple and the other day they crashed by £4 each. I'm wondering whether this is the cause of this. my £1000 is dissapearing rapidly help. i thought id be smart and buy some shares before Job's Keynote on monday.Wish me luck for some ground breaking anouncements.
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Barry Campbell said 8:17AM on 8-05-2006
Rob, in answer #1, nails it: buying opportunity. There may be some short-term unease in the market that drives prices down temporarily; this would be an excellent time to buy a few more shares (or a few hundred more, depending on your wallet.)
Lots of companies have gotten caught up in the options-backdating problem. This is a short-term embarrassment, which will in no way affect the long-term financial health or viability of Apple.
If there is any such thing as a buy-and-hold tech stock these days, AAPL is it; they are poised to ascend even further, especially considering how Microsoft has not only shot themselves in the foot with Vista, they've emptied the pistol and gone back and reloaded...
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