This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple's Streamlined Options Operation

An Apple representative did not comment to a request for a clarification about whether Jobs participated in board discussions about options grants during that 16-month time period. Apple's board members during that time period, including York, also did not respond immediately to calls or email messages seeking comment on Jobs' role during that period.

At the company's developer conference this week, Jobs himself declined to comment on his knowledge about the company's options problems.

Apple handed out just one bunch of options grants to top executives between April 2000 and August 2001. While Jobs did not receive any options in that round of grants, which the company gave out in January 2001, it was still sizable and significant.

In that round, the company gave out a split-adjusted 2 million options each to four executives: CFO Fred Anderson; Timothy Cook, then the company's executive vice president in charge of worldwide sales and operations; Jonathan Rubenstein, then the company's senior vice president in charge of hardware engineering; and Avadis Tevanian Jr., then Apple's senior vice president in charge of software engineering.

As The Wall Street Journal reported earlier this week, that grant looks somewhat suspect in retrospect given how very favorably priced it was.

The strike price of the options handed out in the grant was equal to the market closing price of Apple's stock on Jan. 17 that year. After the market closed, Apple reported its first-quarter earnings that year. In reaction to that news, the company's stock shot up 11% the next day, giving the four executives a paper gain of $1.9 million each. Three months later, Apple's stock was up 21%.

Further, while the company was likely keeping with the regulations in place at the time, it apparently didn't report the grants until 11 months after the fact. The first mention of the grants in a search of the Securities and Exchange Commission filings is in the company's annual report filed in December 2001.

In addition to the options grants, at least one other executive compensation decision made in about the same time period stands out. At some point in fiscal 2001 -- Apple didn't specify the exact date in its filings -- the company transferred to Jobs' control of an airplane bought on his behalf in late 1999. The company assessed the plane's value at the time at $43.5 million, which Jobs reported as a bonus.

The company also gave Jobs another $40 million that year to pay taxes associated with the airplane.

Apple is only one of dozens of companies that are under investigation for their past options grants. In general, the probes are looking into alleged misdating of options grants, particularly backdating. With backdating, corporate insiders are accused of retroactively assigning to options a grant date on which their company's stock was known to have hit a short-term low.

Thus far, the probes have led to criminal indictments of former executives at Brocade (BRCD - Get Report) and Comverse (CMVT). Options troubles at those and other companies have led to the ouster of executives and board members, and have prompted shareholder suits.

The myriad investigations have been thought to be a significant contributor to the summerlong sluggishness in tech stocks; even shares of Apple have recently slumped to give back about half of their post-earnings report bounce from late July. The stock closed Wednesday down $1.19, or 1.8%, to $63.59.

Apple has not elaborated on what kind of, or how many, "irregularities" it has found in its past options grants. However, Apple is the subject of several shareholder suits related to the matter, and the company said last week that what it has found thus far will force it to restate its earnings for fiscal years 2003 through 2005.

Another company whose options have drawn scrutiny of late is Pixar , the animation studio formerly headed by Jobs that Disney acquired earlier this year. The Journal reported on Wednesday that, similar to Apple, decisions about options at Pixar during part of the period in question were made repeatedly by the company's board, of which Jobs was a member, and not by an independent compensation committee.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.88 0.96%
BRCD $9.31 -7.73%
FB $105.74 -1.13%
GOOG $748.28 -1.02%
TSLA $218.25 0.23%


Chart of I:DJI
DOW 17,812.19 +19.51 0.11%
S&P 500 2,089.14 +2.55 0.12%
NASDAQ 5,102.8080 +0.33 0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs