Despite Apple’s (NASDAQ:AAPL) revelation on Wednesday that the company has found 15 instances of options backdating- some of which CEO Steve Jobs knew about - investors have bid up the company’s shares this morning, apparently relieved that Jobs is still running the company.
Nevermind the fact that former CFO Fred Anderson quit the board, or that financial restatements are coming, or that two former execs apprently involved in the backdating have been ID’d in the probe - the conventional wisdom is that the reference is to Anderson and former general counsel Nancy Heinen - and the information turned over to the SEC. The key is, Jobs, at least for the moment, seems to have dodged personal resposibility for what happened. Some comments from this morning:
- Shaw Wu, American Technology Research:To us, this sounds very similar to Hewlett-Packard (NYSE:HPQ) where Mark Hurd admitted he was aware of the investigations, but wasn’t aware that the activities were potentially illegal…We continue to believe that even in the worst case scenario where AAPL is guilty of improper options grants, we do not believe Steve Jobs is liable, the reason being the compensation committee at AAPL is run by an independent board that is not comprised of employees of AAPL.
- Benjamin Reitzes, UBS: We believe the financial impact on Apple will be minimal…While CEO Steve Jobs was aware of some favorable grant dates, he did not receive or benefit from these grants. It seems to us that he was likely unaware of the accounting implications (deduced from Apple’s disclosures). While we may hear a bit more about this issue in the news, we continue to operate under the view that Jobs is on solid ground based on the current facts.
- Richard Farmer, Merrill Lynch: Not Jobs’ finest hour but he likely stays CEO, in our opinion…assuming regulators concur with the assertion that he was unaware of accounting implications, and other matters. We do not believe the question of personal benefit from options irregularities to be as important as whether Jobs knowingly engaged in personal misconduct (e.g., encouraged accounting to deviate from stated procedures), neither of which appears to have happened, according to Apple’s investigation…Some risks persist: the possibility that regulators’ findings and conclusions may not concur with those of the special committee of the company; unresolved potential issues during Jobs’ tenure at Pixar; restatement risk; delisting risk….We continue to recommend share of Apple, with a price objective of $88.
AAPL 1-yr chart: