Marketplace: Apple's Financial Shakeup

Madeleine Brand talks with Marketplace's Janet Babin about Apple's end-of-the-year troubles, and how the market is reacting.

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MADELEINE BRAND, host:

Back now with DAY TO DAY.

Apple Computer is coming clean today over some questionable stock option moves. In public filings, company officials admitted to some irregularities. But they also said that contrary to some reports, CEO Steve Jobs did nothing wrong.

I'm joined now by MARKETPLACE's Janet Babin. And Janet, what did Apple admit to?

Ms. JANET BABIN: Well, it admitted to misdating thousands of stock option grants from 1997 to 2001, some of them issued to company CEO Steve Jobs. But Apple said he - while he knew about the options, he didn't benefit from them.

The company also admitted to inventing a special board meeting where some of the stock options were approved. But it said that no current member of management was aware of the fake meeting. And it was important to investors that Jobs not be too involved here because he's so much a part of the company.

And Madeleine, to explain what a stock option is, it's basically a stock that comes due at a future date. And its value changes according to when you cash it in. And companies give this to people as part of their compensation. In a perfect world, you want to get your stock option when the price of the stock is low and sell high.

But what's happened in the past, before some rules were tightened, is companies would manipulate that date so that employees would get the most value. More than 160 companies are under investigation, or they've started their own investigation into this backdating of stock options.

BRAND: So is Apple now in the clear? Is anyone going to investigate them now?

BABIN: Well, most investors think Apple is clear. Apple said in its filing that it did an exhaustive internal investigation. And Piper Jaffray analyst Gene Munster thinks the Securities and Exchange Commission, the SEC, could look to Apple's investigation when it decides the company's fate.

Mr. GENE MUNSTER (Piper Jaffray): We believe that the SEC is going to view Apple's internal investigation as valid, and we'd be surprised if we hear anything out of the SEC. So we think that this is essentially a closed issue at this point.

BABIN: But, of course, the SEC could still open up or continue its investigation into Apple.

BRAND: Well, what's next for the company then?

BABIN: Well, analysts are very optimistic. They say, you know, Apple's expected to sell 15 to 16 million iPods for the December quarter, and 1.7 million Mac computers, a lot of sales.

And then on January 9th, Piper Jaffray expects Apple to debut its long-awaited product, the iPhone that combines the iPod with a phone. And that's expected to keep the company's popularity and profits up.

Well, coming up later today on MARKETPLACE, we've got a story about free beer and how to get it.

BRAND: Thank you, Janet.

Janet Babin reports for Public Radio's daily business show, MARKETPLACE. That's produced by American Public Media.

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