Unblemished Apple Shines On

The computer maker recovers after an earlier 6% selloff.
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Updated from 2:07 p.m. EST

Like a small-magnitude earthquake, news of

Apple Computer's

(AAPL) - Get Report

deepening involvement in a stock option backdating scandal rattled its shares Wednesday, but ultimately left the stock suffering no visible damage.

Whether out of wishful thinking or genuine confidence, investors stood by the company despite troubling reports raising questions about CEO Steve Jobs' future at the Cupertino, Calif., company.

According to a report in

The Recorder

, a San Francisco-based legal publication, federal prosecutors are looking closely at Apple stock options that were apparently falsified to maximize the profitability of the grants to company executives.

The report also notes that Jobs has retained his own personal attorney in the stock option matter, separate from the O'Melveny & Myers law firm, which is representing Apple as a company.

Shares of Apple fell as much as 6% in early trading Tuesday, but reversed course later in the session and erased the entire loss. Recently, Apple was up 10 cents at $81.61.

Apple disclosed earlier this year that it had discovered irregularities in its past stock option practices and that it had proactively informed the

Securities and Exchange Commission

, putting Apple in the same boat as nearly 100 companies under scrutiny for backdating.

The company acknowledged that numerous stock option grants made between 1997 and 2002 have grants dates that precede the approval of those grants.

While Apple has said that its own internal investigation into the matter raised serious concerns about the actions of two former officers, the company has maintained that Jobs -- who was aware that

favorable grant dates had been selected -- was not aware of the accounting implications and did not benefit from the grants.

"I apologize to Apple's shareholders and employees for these problems, which happened on my watch. They are completely out of character for Apple," Jobs said in a statement in October.

Jobs, who co-founded Apple 30 years ago, is viewed by the Street as crucial to the company's success. Since Jobs returned to Apple for a second stint in 1997, the company has seen its fortunes revived with a series of hit products such as the iMac computer and the iPod music players.

"Apple computer cannot afford to lose Steve Jobs. You don't duplicate Steve Jobs," says David Schamens, an analyst at Invictus Funds, which is short Apple for reasons he says are unrelated to the stock option controversy.

The fact that Jobs has retained his own legal representation does not necessarily indicate that he was involved in the backdating, says Schamens.

"Anytime there is a legal issue, regardless of how severe it is, when you're in the position that Steve Jobs is, you should always retain counsel," he says.

Piper Jaffray analyst Gene Munster put the probability that Jobs was involved in the falsification of stock option grants at less than 5%, citing the company's internal investigation that has already said that

no members of the current management team were involved as well as Jobs' lack of interest in compensation matters.

Munster, whose firm makes a market in Apple shares, said he believes that the investigation will continue to point to former Apple officers rather than Jobs.

Fred Anderson, who served as Apple's CFO until 2004, resigned from the company's board in October. General Counsel Nancy Heinen unexpectedly resigned from the company last spring, before news of the stock option issues surfaced.

Apple, whose shares face delisting on the

Nasdaq

exchange because of its delay in filing financial statements, is expected to file its annual report Friday. The company has said that it expects to restate past financial statements to record noncash charges for stock compensation expenses.