Analysts not concerned about Apple's stock option irregularities

Apple continues to look into what the company describes as “irregularities” in issuing stock options. But don’t expect the ongoing investigation—or an upcoming hearing before the NASDAQ Listing Qualifications Panel—to have much of an impact on any upcoming product releases the company may be planning.

“Apple will try to clear this up as quickly as possible,” said Charles Wolf, an analyst for investment banking and asset management firm Needham & Company. “They certainly do not want this distraction for the iPod introduction that will certainly happen after Labor Day.”

Apple warned earlier this month that it would likely have to restate its historical financial statements to record non-cash charges for compensation expense relating to past stock option grants. In addition, the company said it would delay filing a required quarterly financial report with the United States Securities and Exchange Commission for its fiscal quarter that ended July 1, 2006, as it continues the investigation of stock option irregularities. That, in turn, prompted Apple to request a hearing before the NASDAQ Listing Qualifications Panel to respond to a formal notice from the stock exchange that the company was not in compliance with the filing requirements for continued listing.

Could all that drama behind the scenes distract Apple executives from carrying out whatever they have planned for product releases? Conversely, could Apple’s financial dealings spur the company to speed up product announcements, perhaps as a way of ensuring positive coverage in the press?

Either scenario is unlikely, according to analysts, who expect Apple to follow the same course it always does.

“The financial management of the company runs independently of product development,” said Ross Rubin, director of analysis for market-research firm NPD Group. “I see the impact on products as being immaterial as it has been so far.”

Analysts Macworld spoke to expressed little concern about the fallout from Apple’s internal investigation, particularly since the company was looking into the matter on its own volition. 

“There doesn’t appear to be any malice or intentional misleading that could cause long term pain,” said Rubin. “Apple has a very strong track record and that’s what is really important institutional investors.”

“You really can’t judge Apple and their future on the stock options of the past,” agreed Tim Bajarin, president of tech-industry consulting firm Creative Strategies. “They are at the zenith of their innovation — if you’re an investor you need to look at their ability going forward, not look at what happened in the past.”

The hearing with NASDAQ, which Needham’s Wolf dismissed as “trivial,” is generating the least amount of concern. “The NASDAQ has a rule that if a company doesn’t file its 10-Q within 45 days they are automatically subject to delisting,” Wolf said. “[NASDAQ] will not delist Apple.” 

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