Analyst: SEC Filing to Have Minimal Impact on Apple

by , 8:50 AM EST, December 29th, 2006

Apple Computer reported the findings of its independent investigation into improperly backdated stock option grants on Friday, and will be recording a non-cash charge of US$84 million as a result. The impact of the investigation, according to Piper Jaffray analyst Gene Munster, will be minimal.

The financial impact to Apple over its accounting restatement will be immaterial, and will result in about a two percent change to net income over the past nine years - the time frame covered by the backdating irregularities.

The impact the investigation will have on current company executives will be minimal, as well. The findings indicate that the current management team was not responsible for any of the improperly backdated grants. They also show that CEO Steve Jobs was aware of some favorable option grant dates, but was unaware of the accounting implications.

From Apple's report:
"Although the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications."

The report also looked at a falsified special board meeting to approve $7.5 million in options for Mr. Jobs and found that the current management team was unaware of the irregularity.

"The grant dated 10/19/01 was originally approved at a Board meeting on 8/29/01, with an exercise price of $17.83. The terms of the grant, however, were not finalized until 12/18/01. The grant was dated October 19, 2001, with an exercise price of $18.30. The approval for the grant was improperly recorded as occurring at a special Board meeting on 10/19/01. Such a special Board meeting did not occur. There was no evidence, however, that any current member of management was aware of this irregularity."

Mr. Munster sees the fact that the investigation did not find any wrong doing on the part of Apple's current management team a positive, especially since some investors were afraid that Steve Jobs would be forced out of the company. He also expects that any SEC findings will be consistent with Apple's independent investigation, which included over 26,500 man hours and a review of over 1 million documents.

Piper Jaffray is maintaining an "outperform" rating on Apple's stock with a target price of $99. Apple is currently trading in the pre-market at $84.11, up 3.24 (4.01%).

If you are interested in Apple's stock, join our forum members in the Apple Finance Boards, a moderated forum for Apple Investors and people who are interested in Apple's financial dealings. For other stories regarding Apple's stock activity, visit our updated Apple Stock Watch Special Report.