Relax. Steve Jobs is not dead even though you might have read his obituary yesterday on Bloomberg. The financial news service was updating its obituary on Jobs and accidentally published it on its wires.
“It was momentarily posted on the external wire, in error, and immediately deleted (within thirty seconds),” a spokeswoman for Bloomberg told DealBreaker.
It’s not likely many were fooled into thinking the head of Apple was dead. It was full of blank spaces marked “TK” and “XXXX.” The obituary contains notes on who to contact for comments on the death of Jobs. Named are Steve Wozniak, Larry Ellison, Al Gore, Bill Gates and Eric Schmidt, among others. So now Jobs knows who he should suck up to if he wants them to say nice things about him when he’s dead.
The subheads tell you most of what you need to know. The first is appealingly morbid: “Time Is Limited.” The rest read: “Change the World” “Mac” “Reality Distortion Field” “Sugared Water” “`Toy Story’ Success” “Back to Apple” “We’re Back” “Backdated Options” “Common Bug” “Great Work.” Gotta love that sequence of back, back, backdaing, bug, RIP. (Gawker posted the whole thing here.)
Just in case this happens again, we suggest you check here for updates on the vitality of Jobs before trading.
The story also contains a canned explanation of the likely drop in Apple’s stock. After the jump, read why the stock drop “is no surprise to investors and analysts.”
Steve Jobs
Apple issued a stern warning yesterday to cult members that they may “permanently damage” their cell phone/iPod combos by using “unlocking programs” in an effort to get the Cadillac of mobiles to work on unauthorized, non-AT&T networks. Speaking in hushed tones the company was vague in describing the actual technical problems, only saying that fraternization with the evil programs (that might jeopardize their licensing agreement with AT&T) would render the phone “permanently inoperable” when users install future software updates. Any issues that arise from the installation of forbidden software are not covered in the warranty.
In a recent interview, Mock Turtleneck cackled at the idea of being threatened by such programs. “It’s a cat-and-mouse game,” the High Priest of A said. “We have a lot of really good cats.”
Apple Sounds Warning on iPhones [WSJ]
Steve Jobs has been subpoenaed by the SEC to be deposed in a backdating case against Apple’s former general counsel, Nancy Heinen. Though the news sent shares of the fruit down 1 percent, with a $140.31 close (-0.33%), investors should rest assured that while Heinen may fry, this doesn’t mean jack for the company or Steve.* Why? Because, in SJ’s words, “Fuck you, that’s why, I’m Steve Jobs. Death to the right click. Buy an iPod. Or don’t. I could really care less either way. It’s your funeral.”
Jobs subpoenaed over Apple stock scandal [The Guardian]
*Who backdating specialist Al Gore cleared of any wrongdoing earlier in the year.
So tomorrow Apple will hold a special event in San Francisco called “And the Beat Goes On,” presumably to make some sort of an announcement about iPods that could raise shares to the sort of levels that would allow Mock Turtleneck to continue to enjoy the sartorial lifestyle he and his cervical spine have grown accustomed to, for many years to come. The most pervasive rumor-on which shares of AAPL have risen 18.8%-is a new line “with significantly greater functionality at current price points, including the much-anticipated full-screen video iPod,” according to Goldman Sachs analyst David Bailey. And that would be good, considering that in the middle of last year, Apple’s iPod sales dropped for the first time since the slightly more compact Disc Man debuted in 2002, a failure largely blamed on a dearth of new versions.
But what, exactly does Jobs possibly have up his sleeve? There’s talk of the new ‘Pods running on OS X; a Wi-Fi-enabled iPod that would allow for wireless music and video; and the introduction of the Beatles to iTunes. If you work for JP Morgan, you probably also think that a low-cost, Nano-sized iPhone is on the horizon. Then there are the fringe rumors that the new iPod will: feature no buttons, knobs or screens of any kind, instead employing newly-patented mind-reading technology for functionality; produce a force-field causing all Zune products within a 200-foot radius to immolate, rendering them as useful as they are in non-burned-to-a-crisp state; and come with videos personally damning to Microsoft founder Bill Gates, preloaded.
And, of course, the name of the invite-only conference seems to indicate that a reception will follow featuring group sex led by Sonny (surprise! SJ is a necrophiliac) and Cher, while the video for “The Beat Goes On” plays on an 80 GB iPod plugged into speakers nearby. Stay tuned.
Apple’s ‘Beat’ To Go On Tomorrow (Be Here!) [CNBC]
Apple likely to introduce new iPod with large touch screen [Times Online]
Wouldn’t it suck if you paid $50,000 for a cell phone/iPod combo and then couldn’t activate it? Perhaps we should ask the 2% of iPhone purchases who suffered such a fate, which, according to estimates by Steve Jobs, translates to roughly 1 billion people.
Jay Gurfein bought his mobile Friday night at an Apple store in Nassau County (…). As of Sunday afternoon, he hadn’t been able to use the device. And just to make things interesting, when the Jay-man-LI initially tried to activate his service, AT&T immediately ended service on his existing BlackBerry, leaving him alone in the world for “more than 45 hours.”. By late Sunday night, AT&T, having had a spark lit under its ass by iGod himself, had gotten Gurfein’s phone on and given him a $150 credit for ruining his life.
In Louisiana, pretty much the same deal happened to Jaci Russo, except she also dropped two calls. In Murray Hill, one disgruntled user reported his iPhone’s failure to get him laid, even after whipping it out Joshua Tree and asking several female patrons if they’d like to touch it. Steve Jobs–sleep with one eye open.
Some iPhones Are Stuck on Hold [WSJ]
We keep thinking it would have been better if they had mentioned backdating. But maybe that’s just us.
Things that had no effect on Apple’s share price: Jobs’s backdating, the iPhone-Engadget blooper, Portnoy fucking (an) Apple.
Also: Apple posts higher profit on strong MacBook sales [Reuters]
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Apple
Breaking: Apple Backdating Charges, A Settlement And The ‘Apple Rule’ Put To The Test
By John Carney
The force field that seems to have protected Steve Jobs from the harsh scrutiny that the press and regulators have applied to other executives allegedly involved in stock options backdating is being put to the test today. The Securities and Exchange Commission filed charges against two former Apple executives—former chief financial officer Fred Anderson and former general counsel Nancy Heinen. And one of them has reacted by pointing an accusatory finger at the man at the top of the Apple.
Each of the two formers have reacted very differently to the charges. Heinen has vowed to fight the backdating charges, joining the thin ranks of other corporate executives who have decided to fight the SEC rather than settle. Anderson is going the other way. The announcement of his settlement with the SEC was made right after the charges were filed. But Anderson didn’t just settle—he released a statement placing the blame for the backdating of stock options at Apple squarely on the shoulders of chief executive Steve Jobs.
The statement shreds one of Jobs strongest lines of defense—that he didn’t understand the accounting implications of changing the options grant dates. Anderson’s statement has Steve Jobs as the key actor at each of the critical points. It sounds as if the ‘Apple Rule’—the unwritten rule protecting high-profile, popular executives (but not unpopular executives or formers) that regulators, prosecutors and the press seem to follow on backdating—is about to take a pounding.
The stock is trading up on the news—perhaps under the impression that the Apple Rule will continue to protect Jobs—but the reactions from the press and online media have been swift and punishing.
ValleyWag predicts that Jobs may face charges, going so far as to announce that its editor has sold out his position.
“Disclosure. I just sold all my Apple stock, before writing this post. (The stock is soaring, but I can’t believe traders have properly digested the news.) Steve Jobs, the company’s hugely valuable chief executive, must now be squarely in the sights of securities regulators,” ValleyWag says.
Endgadget also smells blood in the waters of Cupertino, where Apple’s headquarters is located. “The tech exec superstar who’s largely gotten off clean despite Apple’s lingering backdated stock options scandal is now being publicly blamed for wrongdoings by former Apple CFO Fred Anderson,” Endgaget writes.
Perhaps the most surprising reaction comes from Business 2.0’s blog, which examines how Jobs and Anderson dealt with their backdated stock options and concludes that the difference proves that Anderson is financially much smarter than Jobs. Anderson reportedly made as much as $3.5 million on his backdated stock options—an amount he has now agreed to “disgorge” (read: fork-over) to the government—while Jobs exchanged his backdated stock options for restricted shares. Jobs trade means he missed out on a $3.6 billion gain.
Oddly enough, that financially unsound decision may be what keeps Jobs out of trouble on backdating. He can credibly claim that he did not profit from the backdated stock options since he never cashed them in. But prosecutors and regulators have already shown a willingness to bring charges in other cases where executives did not personally see profits from backdating, so this might not be enough to keep the Apple Rule intact.
SEC files charges against 2 former Apple officers over options [Associated Press in the International Herald Tribune]
Former Apple CFO settles with SEC [Reuters]
Former CFO blames Jobs for backdated options grant [San Jose Mercury News]
Ex-CFO says Jobs was warned of options dates [Market Watch]
Attorney for Fred Anderson Issues Statement Regarding Settlement of Claims with the SEC [Press Release via Business Wire]
Steve Jobs in regulators’ sights [ValleyWag]
Former Apple CFO publicly blames Jobs for stock options scandal [Endgadget]
Why Fred Anderson Is Smarter Than Steve Jobs [Business 2.0]
Earlier on DealBreaker: Backdating and Apple stories from the DealBreaker Archives.
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Back Dating
The Man of Steve: More Backdating Charges Bounce Off Apple Boss
By John CarneyYet another company has cleared Steve Jobs of any wrong-doing in the backdating of stock options that occurred while he was hanging around. Pixar, which is owned by Disney, issued a statement declaring that “no one now associated with Disney committed ‘any intentional or deliberate acts of misconduct,’” according to the Wall Street Journal. Since Jobs is now a director at Disney, this is pretty much meant to clear his name.
Roger Parloff at Fortune finds this a bit implausible.
The story line at both Apple and Pixar appears to be that Jobs, the notorious micromanager who headed both companies at the time of the backdating, did not understand the legal or accounting ramifications of backdating. Interestingly enough, virtually Jobs’s only compensation at either company during this period was coming from the Apple options whose workings he so poorly understood. (During the relevant years, his salary at Apple was famously just $1 per year, while at Pixar it was about $55 per year.)
The thing that puzzles me most is this: If you don’t understand the accounting ramifications of backdating, why do it? Why not just issue the options dated as of the actual date you’re issuing them, and simply choose whatever strike price you think is appropriate — even though it may not correspond to the current stock price?
Meanwhile, over at Ideoblog, Larry Ribstein wonders how Jobs’ case is different from executives who have been indicted for their role in backdating stock options grants. One possibility:
Of course, if Jobs were charged, and Apple crushed, lots of people might start asking whether this whole corporate crime thing has gone too far.
Disney clears (wink-wink) Steve Jobs of options backdating misconduct at Pixar [Fortune]
Disney and the Apple rule [Ideoblog]
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Apple
Another Backdating Indictment: McAfee’s Former General Counsel Charged
By John Carney
The former general counsel of McAffee yesterday became the eleventh person charged with criminal offenses related to stock-options backdating. The feds have said they are examining some 140 companies for backdating but its not hard to see why McAffee’s former general counsel ended up high on its lists for criminal indictments.
First, McAffee was an early and somewhat easy target for the feds because the company has had to restated its financial results five times in the past five years. The company faced securities fraud charges in connection with an alleged scheme to overstate revenue from 1998 to 2000. It settled with the authorities by agreeing to pay a $50 million civil penalty, but neither admitted nor denied any wrong-doing. It’s former controller, however, pleaded guilty to one count of securities fraud.
Kent Roberts, the indicted former general counsel, allegedly manipulated his own stock options grant date, as well as that of his chief executive. He then allegedly turned around and fired the controller for manipulating stock options grant dates. Nasty. His indictment has been expected for at least two weeks now.
Roberts seemed to have tripped the self-dealing alert that we’ve seen in other backdating indictments, and engaged in some corporate backstabbing that makes him hardly a sympathetic character. Here are the details on the indictment from the Wall Street Journal:
According to a seven-count indictment returned by a federal grand jury in San Francisco, Mr. Roberts in late 2000 became dismayed that an option grant made to him earlier that year was “underwater” — that is, its exercise price of $29.62 was higher than the stock’s price at the time. An option can only be cashed out for profit if the exercise price is below the open-market price of the stock.
According to the indictment, Mr. Roberts directed the company’s then-controller, Terry W. Davis, to change the grant’s record so it appeared to have been granted April 14, 2000, a day the stock fell to $19.75. That immediately made his grant more valuable, though he never later cashed out any of the options for a profit.
Mr. Roberts got Mr. Davis pushed out of his job, the indictment says. In 2002, Mr. Roberts headed an internal probe of irregularities at McAfee, which was then known as Network Associates Inc. Upon learning that Mr. Davis, who wasn’t identified by name in the indictment, had among other things lowered the exercise price on some other options, Mr. Roberts recommended that he be removed from his finance-department position, the indictment said. It added that Mr. Roberts didn’t tell internal auditors or the SEC that Mr. Davis had manipulated Mr. Roberts’s own grant.
It’s notable that the prosecutors seem to have concluded that the self-dealing trigger was pulled when Robert’s manipulated his own grant even though he never cashed out the backdated options. This is important because the “no gain from backdating” has become a major line of defense for some corporate executives, including Apple chief Steve Jobs. So the question remains: will the feds indict Jobs or will the “Apple Rule” continue to protect him? (More on the “Apple Rule” from the man who coined the term here)
McAfee’s Ex-Counsel Is Charged With Options Fraud [$$] [Wall Street Journal]
McAfee Ex-GC Indictment [pdf file via WSJ Law Blog]
