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Infinite Loop / The Apple Ecosystem

A cloud over Macworld Expo (updated)

Rumors of fraud are now circulating around the stock options scandal.

In recent years, Apple Computer stock has risen as Macworld Expo approaches, and this year has been no different. Boosted by increasing sales of iPods and Macs, the exuberance of analysts' expectations, and rumors of iPhones and "true" video iPods, AAPL rose to over $91 a share at the end of November. As December comes to a close, the stock is now hovering around $80 a share, after having been down as far as $76.77 this morning.

What happened?

Justin Scheck, writing in The Recorder, may have some unpleasant insight into the situation, but to recap the scandal thus far:

  • In July, the "mishandling" of stock option grants was first reported.
  • In August, Apple Computer's own internal investigation found "irregularities" in the exercising of options, which would require restatement of earnings as far back as 1997.
  • In October, Steve Jobs apologized to shareholders and employees over the matter.

This brings us to the potential bombshell that has been dropped just two weeks before Macworld Expo.


The term that is being discussed here, that would be the difference between civil and criminal inquires, would be fraud. However, even if that is the case the situation will likely be manageable, as long as we are talking about former executives. While Steve Jobs was aware on some level that "questionable practices" were going on, he has explicitly stated he did not benefit from those practices. Of course, Steve Jobs has also hired outside counsel, not that anything should be inferred from that.

But it does give a whole new meaning to "one more thing" in the Keynote, doesn't it?

UPDATED: 12/28/06

Writing for the Financial Times, Richard Waters clarifies the allegations of falsifications, and that clarification appears to link Steve Jobs to the scandal directly. 7.5 million in stock options granted to Steve Jobs in 2001, which he later surrendered without exercising, appear to have been granted without approval from the board of directors, but that's not the problem. 


Apple Computer will make its long-delayed SEC filing by tomorrow, but the information found there will likely not answer the one question on many minds.


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