Apple Investigates Stock Options

Elena
30 Jun, 2006
New York City

The maker of personal computers and the iPod music player said that its own internal investigation had uncovered

[R]8:00AM BP Apple admits possible stock options could be mishandled.[/R]
Apple Computer Inc. ((AAPL)) admitted that some stock options awarded to employees might have been mishandled, a problem threatening to raise questions about the accuracy of past financial statements. The maker of personal computers and the iPod music player said that its own internal investigation had uncovered ‘irregularities’ in employee stock options issued between 1997 and 2001.

Apple said it had hired an outside lawyer to lead an investigation into its past stock options and had also notified the Securities and Exchange Commission of the problem. Subsequently, the SEC launched its own inquiry after other companies raised a red flag about their past stock options. Nearly half of the 57 companies that have disclosed stock option trouble are based in Silicon Valley and other parts of the San Francisco Bay area.

Most of the stock option investigations so far have revolved around a practice known as ‘backdating.’ Stock options become more valuable as the market price rises above the exercise price, so backdating fattens the recipient''s profit. Backdating stock options isn''t necessarily illegal, but it can cause a company to deduct employee compensation expenses improperly that could exaggerate profits and result in an underpayment of taxes. Apple didn''t say whether its stock option trouble involved backdating.


[R]7:30 AM Asian stocks rally in the wake of Fed’s decision on rates.[/R]
Asian markets finished higher on Friday. In Tokyo, the blue-chip Nikkei 225 index advanced 2.54% to settle at 15505.18. Auto stocks led the way, as Nissan Motor and Mazda Motor both surged 5% and Toyota Motor gained 4.18%. Oil-sector stocks were also buoyed as crude-oil prices advanced. Inpex Holdings soared 6.8% and Nippon Oil gained 2.8%. Hong Kong''s Hang Seng Index advanced 2.54% to16267.62. Cheung Kong Holdings advanced 3.7%, while Sun Hung Kai Properties climbed 2.6%. Sino Land rose 7.4% and Hang Lung Properties added 6.11%. In Seoul, the Korea Composite Stock Price Index, or Kospi, setttled up 2.5% at 1295.15. Financial shares bounced back, leading the gainers in the broader market. Kookmin Bank surged 3.9%, Hana Financial Group rose 3% and Industrial Bank of Korea jumped 4.6%. The Weighted Price Index of the Taiwan Stock Exchange gained 1.5% to 6704.41, while Sydney''s S&P/ASX200 index rose 1.53% to 5037.9.


[R]6:30 AM European stocks surge after Fed’s dovish statement.[/R]
European markets traded higher on Friday. The U.K. FTSE 100 index gained 1% at 5,851, the German DAX Xetra 30 index advanced 1.4% at 5,658, the French CAC-40 index rose 1.3% at 4,941. The advance was broad-based, but energy stocks were among the leaders after strong gains for their US peers as crude prices advanced above $73 a barrel, closing in on the $75.35 record set in April. Norway’s Statoil gained 2.5%, while France’s Total added 1.5% and Finnish refiner Neste Oil climbed 2.1% . Top gainers also included technology companies including Ericsson, up 2.1%, and automakers such as Renault, 1.3% higher. European movers included Germany''s Siemens and Bayer after they struck a deal over Bayer''s diagnostics division. Industrial conglomerate Siemens gained 1% after it announced late Thursday that it has agreed to buy Bayer''s diagnostics unit for 4.2 billion euros in an effort to expand its healthcare equipment and services business. Bayer shares surged 4.1% after the news.

Light sweet crude oil for August delivery gained 18 cents to $73.70 a barrel, while Brent crude futures on the ICE Futures exchange in London advanced 11 cents to $73.11 a barrel. Gold advanced to a two-week high of $602.30 an ounce before easing to $600.10/600.80 by mid-morning trading, up from $592.00/594.00 late in New York on Thursday. The dollar extended losses across the board after the Fed''s latest policy statement signaled a pause in the central bank''s long monetary-tightening campaign. The euro bought $1.2702 in morning European trading, up from $1.2644 in New York late Thursday. The British pound climbed to $1.8330 from $1.8260. The dollar also fell Friday against the Japanese currency, slipping to 114.74 yen from 115.26 yen.