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Apple Computer shares recover
2006-12-27
Apple Computer Inc. (Nasdaq:AAPL) shares fell as much as 6 percent on Wednesday on a report of new developments in its stock options inquiry, but the shares later turned positive after analysts shrugged off concerns that the company faces deeper legal risks. Shares in the maker of iPod digital media players and Mac computers rose 33 cents to $81.84 in heavy afternoon Nasdaq trade. Earlier they had fallen as low as $76.77. The report, from legal trade publication The Recorder on the Web site Law.com, said that federal prosecutors were looking at "apparently falsified" stock option documents in their probe of Apple's previous grants. The report also said Apple Chief Executive Steve Jobs had hired his own attorney to deal with inquiries by the U.S. Securities and Exchange Commission and Department of Justice.e Analysts said that the concerns about greater legal risks to Apple were overblown and that fallout from the options probe would not affect the company's financial performance. "We have seen investors begin to speculate on a rebound in Apple shares," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York, pointing to heavy trading in Apple stock options. Apple spokesman Steve Dowling declined comment. He said that the company is providing all details that emerge from its options probe directly to the SEC, but that it is not discussing the matter with the public. "Any time you get the stock options probe mentioned, especially with rumors of falsifying documents, the hot money tends to shoot first and ask questions later," said Tim Biggam, options strategist at Man Securities, an options brokerage firm in Chicago. Cupertino, California-based Apple has previously said it expected to restate financial results for some periods after identifying irregularities in its stock options accounting. "We continue to believe the financial impact on AAPL will be minimal and it seems that AAPL is moving forward," UBS Securities said in a note to clients. Analysts have said their biggest concern about fallout from the options probe is that the investigation could lead to the departure of Jobs, a company founder who has been lauded for turning its fortunes around with the market-dominating iPod and a revamped line of Mac computers. In October, Apple's board said that in some cases Jobs had been aware that stock options had been backdated. It cleared him of any misconduct, saying that he did not benefit from the grants and had been unaware of the accounting implications. "People have sort of ignored the possibility that Steve Jobs could be in trouble and might have to leave the company given the options problem. I think the news today confirms that is a risk," said Benjamin Halliburton, managing director at Tradition Capital Management in Summit, New Jersey. He and his firm do not own Apple shares. The decline in Apple shares was aggravated because it is close to year-end and many investors sold the stock to hold onto gains Apple added to their portfolios throughout the year, said Peter Boockvar, equity strategist at Miller Tabak & Co. Apple shares are up 13 percent year to date. Apple is one of more than 160 companies that are either under federal investigation or that have launched their own inquiries into whether they manipulated grant dates of options to benefit executives who received them. (Additional reporting by Emily Chasan in New York, Doris Frankel in Chicago and Susan Heavey in Washington.)
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