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Analysts are throwing cold water on a report that pushed down Apple Computer’s (AAPL) shares by as much as 5.8% early Wednesday. Investors have been responding to an article in the Recorder, a legal newspaper, which says that Apple may have falsified documents concerning its stock options grants. The Recorder is owned by ALM Media, which also owns The American Lawyer magazine.

Eric noted back in October that The New York Times said it was unclear whether Apple CEO Steve Jobs has been the focus of Federal investigators. The Recorder’s article today notes that Jobs has retained personal legal counsel, implying he may be more involved than previously thought. The article hints that ugly things will come out of Apple’s annual report, expected Friday:

It must be some consolation for Apple Computer that the company’s annual report is going to be published during the slowest news week of the year.

Given the uncomfortable admissions about its past stock options practices — and the cost to the company — that Apple will have to make in the delayed SEC filing due by Friday, less public attention is probably a good thing.

But the lull is unlikely to last long. According to people with knowledge of Apple’s situation, federal prosecutors are looking closely at stock option administration documents that were apparently falsified by company officials to maximize the profitability of option grants to executives.

In its October SEC filing, Apple said that, “in a few instances,” Jobs “was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications.” The statement said no current Apple executive was suspected of wrongdoing.

But in recent weeks, Jobs has apparently decided that he needs his own legal representation, separate from Apple’s lawyers at O’Melveny & Myers, and has hired his own attorney to deal with the SEC and Justice Department.

But analysts are starting to shrug their shoulders at this item. UBS analysts Benjamin Reitzes, who follows Apple’s stock, says there’s nothing much new in the Recorder’s revelations, and he maintains a Buy rating on Apple shares. From his report:

  • We believe AAPL shares are down about 4% today due to an article on law.com stating that authorities are looking closely at the company’s stock option administration documents. While it is well known that AAPL has been cooperating with the SEC, the article states Steve Jobs has hired his own legal representation to deal with the SEC & Justice Dept.
  • AAPL Expected to File 10K & 10Q by Friday
    AAPL anticipates filing its 10-K for the fiscal year ended 9/30 & its 10-Q for the fiscal quarter ended 07/01 by 12/29. AAPL has stated it will likely need to restate historical financials for non-cash charges. We continue to believe the financial impact on AAPL will be minimal & it seems that AAPL is moving forward.

  • Jobs Legal Representation Normal Course of Business
    Investors seem to be reacting to the mention of Steve Jobs. We believe it could make sense to obtain counsel given his immense personal fortune & influence. We believe AAPL seems to be on track toward putting options issues behind it & expect delayed filings within 2 days. We should also receive more information regarding the probe & the potential impact on mgmt.
  • Valuation: Target $108 - Reiterate Buy 2
    Our target is based on 32x our FY08 est. (in line with AAPL’s 10-yr mean). We look forward to hearing about new products & prospects for revenue re-acceleration at Macworld.

And Briefing.com notes a report from Soleil Securities (presumably from analyst Shannon Cross, though the analyst’s name is not given), that is similarly skeptical:

[Soleil] notes the article [in the Recorder] does not provide a link between CEO Jobs retaining outside counsel and any personal involvement Jobs may have had, beyond what Apple has already disclosed. [Soleil] says they to assume that if the board had determined that actions taken by Steve Jobs had raised “serious concerns”, they would not have stood behind current management. Further, [Soleil] say had Jobs actually been intimately involved, one would assume that he too would have retained personal counsel long ago, as both [former CFO Fred] Anderson and [former general counsel Nancy] Heinen did.

Apple shares bounced back by the close Wednesday, ending up a penny. The high price on the Street among 12-month price targets is $115, the lowest being $80.


See also: Apple Stock See-Saws On Reports Of Faked Options Docs

Source: UBS: Apple Options Fears Overdone