With All the Focus on Apple's Options Issues, When Will We Hear About Microsoft's?

Includes: AAPL, MSFT
by: Yankee Group

By Carl Howe

This week, the news has been all aflutter about Apple's (NASDAQ:AAPL) options practices, and sometime in the next few weeks, we'll probably hear a reprise of Dell's practice as well when it files its delayed quarterly report. But we haven't heard anything about Microsoft's (NASDAQ:MSFT) similar practice, as documented in the Wall Street Journal this summer. Further, some have said that the practice at Apple was actually initially pioneered by Deloitte and Touche, Microsoft's auditor.

Just as with Apple, Microsoft discontinued the practice, but to my knowledge, has never restated any quarterly results to account for the costs. Given that the practice actually was quite similar to the allegations against Apple, namely, that options were granted prior to actually setting the actual strike price, the big question outstanding is, "Why?"

My point: this isn't just a financial issue, but a marketing and branding one. The SEC actions to date have been onesies and twosies. But when the new Congress convenes in January, I would expect to see a lot more scrutiny of corporate compensation and lost taxes from improper accounting under the Democratic leadership than we saw in the past 12 years. Companies that haven't reached agreements with the SEC by then could face much more aggressive prosecution, with a corresponding hit to their brand value.