Apple Insiders' Happy Tunes

Tevanian received a base salary that year of $469,681 and got a mere $1,500 cash bonus.

The exercises succeed Apple stock's rocket rise. Shares are up 75% in the year to date and nearly 400% over the last two years. Over that time, Apple's revenue and earnings have swelled, thanks to booming sales of the company's iPod digital music players.

Still, the exercises offer a window into executive compensation practices at the company, which has been one of the more prolific dispensers of options among public companies.

In fiscal 2004, for instance, Apple awarded a net grant of 15 million options, or about 4% of its outstanding shares at the end of the previous year. At the end of fiscal 2004, Apple had outstanding options representing about 14% of the company's share count.

The gross quantity of options being sold by insiders should be balanced against the stock's big run, says Darren Chervitz, research director at Jacob Asset Management, which is long Apple. As for Jacob, the firm isn't all that concerned about the sales, because Apple represents only a small position for the fund.

However, "If Apple was one of our top 10 holdings, I would be lot more concerned about significant insider sales," Chervitz says.

In addition, insider sales aren't necessarily predictive of the longer-term outlook for a stock, says Mark LoPresti, who tracks insider sales as a senior quantitative analysts at Thomson Financial.

Not only has Apple's stock done well in the last two years, but also it has strong momentum behind it, underlined by strong earnings growth and well-received, new product launches, he says.

"You have to be cautious when you look at insider activity," says LoPresti. "It's usually perilous to sell stocks with high momentum on the basis of insider selling."