Friday, August 04, 2006

A&E = Apple and Enron?

As reported by MacMinute:

Apple stock irregularities expand in scope

Apple late yesterday said it has discovered more evidence of irregularities related to stock-option grants and warned that it may have to restate earnings back to September 2002, reports MarketWatch. Apple said it will delay filing its report for the latest quarter with the Securities and Exchange Commission. Apple also said it also will likely need to restate results to record non-cash charges for compensation expense relating to past stock-option grants. "The company added it hasn't determined the amount of the charges, and all earnings reported issued relating to periods beginning Sept. 29, 2002 should not be relied upon," notes the story. "Apple officials did not immediately respond to a request for comment."

Just know that while this sounds like some scandalous Enron-esque problem (and it is serious) that Apple is really only covering itself because of new laws and regulations that are retroactive. Also note that Apple has almost always been run like a small business and like a cool local culture business in San Francisco. Think about it this way ... many small businesses don't report all the compensation the owner takes either.


Anonymous said...

It's also worth pointing out that most 'small businesses' aren't publicly traded companies that are required to be accountable to their owners, the shareholders. This is no Enron. Still, Apple, which ranks #159 on the Fortune 500, really has no excuse for misrepresenting compensation costs to its shareholders.

FYT said...

True ... Apple doesn't have an excuse ... HOWEVER this is ALL due to a law that was passed recently about disclosing stock options in quarterly profit counts. The law is retroactive to 2002.

It's murky water as to whether this is anything illegal or not.

Anonymous said...

Comparing apple to enron even in a headline is ridiculous. Enron was starting scores of shell companies, actively bilking customers and involved in all sorts of shady business practices.

This whole "scandal" is about a specific kind of stock options as a way of paying employees that has fallen out of favor and that apple doesn't practice any more. It's not nothing as Apple's accounting definitely should have taken this into account, but it's not earthshaking either.

Apple is a great company that makes great products and if past earnings are off a percentage point or two, then Apple's stock will quickly drop to reflect that imbalance. My guess is the market will overreact and this will be a buying opportunity.

Anonymous said...

Apple Enron headline: satire?

Anonymous blogger's last comments: ridiculous?

FYT said...

I wasn't comparing Apple to Enron ... just it seems like the Mac Web is!