For Now, Apple, Jobs Get Benefit of Doubt

Apple Computer (AAPL), which has gone from Wall Street darling to dog many times over the years, probably won't uncover any serious wrongdoing from its internal investigation into options backdating, analysts say.

On Thursday, the maker of the iPod and Macintosh computer said it found irregularities in some stock-option grants made between 1997 and 2001. One of those options was to Chief Executive Steve Jobs, but Apple says he got no financial gain from it. He was awarded restricted shares after the cancellation of that grant.

A special committee of Apple's outside directors has hired independent counsel to perform an investigation, and the company has informed the Securities and Exchange Commission.

"While this announcement will clearly weigh on the stock, we believe that the outcome and the consequences may prove to be relatively benign,'' writes JPMorgan analyst Bill Shope, who rates the stock overweight, in a note today to clients. "The key is that it is an internal probe and not a probe initiated by the SEC.'' JPMorgan makes a market in Apple stock and has provided non-investment-banking services.

Jobs, who co-founded Apple in 1976, remains a favorite of Wall Street for orchestrating the company's resurgence. For now, analysts say they aren't worried about him becoming caught up in the ongoing controversy over backdating.

"We believe that the Apple story hinges on Steve Jobs given his grasp of the consumer market and unique ability to energize an entire company around timely rollouts of exceptional new products,'' writes UBS analyst Benjamin Reitzes, who rates Apple a buy, in a note to clients. "While it is early in the investigative stage, we believe that Jobs' standing at Apple and with shareholders is on solid ground.''

Apple has been a noninvestment-banking client of UBS, and UBS also makes a market in the stock. UBS says that either one of the analysts who cover Apple or a member of the analyst's household owns the shares. The disclosure isn't more specific.

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