Apple Receives Stock Delisting Threat

By Ed Oswald | Published August 11, 2006, 5:59 PM

Apple's troubles regarding the issuance of stock option grants and the surrounding fallout came to a head Friday. In a statement issued by the company after the close of the market, Apple disclosed it had requested a hearing with a NASDAQ committee following the receipt of a letter threatening the company with delisting its shares.

NASDAQ's threat came after Apple failed to file on time a Form 10-Q, which is a more detailed version of the company's quarterly earnings, with the Securities and Exchange Commission. The company warned that it would miss the deadline during the day Friday, and amended the filing to include notice of the NASDAQ’s actions later in the afternoon.

"The Company anticipates that there will be significant changes in the results of operations for the quarter ended July 1, 2006 compared to the quarter ended June 25, 2005, including significant increases in the Company's revenue and expenses," Apple said in the filing.

The problems surrounding the reporting of stock option grants has spread through the technology industry like wildfire over the past several months. Companies including CNET Networks, Intuit, VeriSign and others are all the target of a federal investigation that alleges the companies allowed the dates of stock grants to be altered in order to make more money for their employees.

Stock options enable individuals to purchase shares in the company at a "strike price," which is equal to the stock's value on a certain date. By moving the date back, employees are able purchase the options at a lower cost.

While not necessarily illegal, hiding the practice from shareholders and the SEC is. Additionally, in some cases, extra taxes may not be paid, which would constitute tax evasion. In total, some 80 companies are under investigation, many for the "backdating" practice.

While the process of delisting notification by the NASDAQ is not all that rare, it is rather uncommon for large corporations like Apple to be the target of such letters. The process allows for the company to request a hearing on the matter, and in the meantime Apple's stock would remain on the market.

At least one tech company, Mercury Interactive, was delisted over a similar spat with the NASDAQ.

It is unclear at this time what the likely restatements to Apple's earnings would do to its profits. Last quarter, it said it had made a profit of $472 million, continuing the growth of a company that many thought would collapse in the late 1990s.

In any case, Apple says it remains committed to remedying the issues. "The Company is focused on resolving these issues as quickly as possible and plans to file its Form 10-Q following completion of the independent investigation by the special committee of Apple's outside directors," it said in a statement.

Comments

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A mac, windows, and linux guy enter a bar. The mac guy gets hauled away by the feds, the windows guy has a seizure and locks up, and the linux guys is fine but no one talks to him.

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steve jobs could jump ship and go on the new york stock exchange.....nasdaq has its rules and so does the security exchange for filing these quartely reports .....apple has so much cash reseves and the analysts know this they still say apple computer stock is a but and will hit highs of $72 to $80 a share this coming year 2007....and in conclusion to all you apple haters a apple a day keeps $$$$$$$in your accounts

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it's more than that. this is fraud, sec is on it too. just switch to nyse will not solve the problem. and against, if they get delisted by nasdaq, what make you think nyse will take them?

it will be interesting to see how much of their profit went to executive's stock options.

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New commercial:

Hello, I'm a Mac, and I’m a PC.
Did you know that Macs get delisted and Windows doesn’t??? Yeah, ain’t it a b!tch!!! Tou-ché :-)

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why dont you use your vista software and spend that 500 million ....on more research for software that doesnt even work and take a hike to redwoood.california as steve jobs would say...... at least apple's leopard software is established and has a market and is making $$$$$$$ in cuppertino

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Does that mean you don't like my commercial???lol

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So much for being a total fan boy.
And for your information Apple is mostly making money with iPods and the overpriced hardware, not Leopard.
Err well maybe you're right after all, asking 129$ for every service pack they release must be a lot of money.

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No, "Service packs" are free, like 10.4."7", 10.3."9"

yesh, it would be cheaper to buy a new low end mac, instead of buying a new box of Leopard, in a sense that what you own is a G3 or early rev og G4, though Leopard will support G3

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er.. just in case anyone hasn't noticed - these delisting threats are 'relatively' common and in this case, probably has minimal impact on Apple as a going concern. Late 10Q forms are due to quite a few reasons that happen all the time..

It's just a compliance and reporting issue - surely they wouldn't be paying out so much to employees the company would go bust...

Unlikely that Apple wouldn't throw sufficient resources to rectify this..

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Common for smaller companies. In this case the failure to file on time probably isn't an administrative oversight but something more serious. Given that Apple has already said they are going to restate earnings the actual earnings will probably much lower than what earlier predictions had.

It's unlikely that they will be delisted over this but some of the shareholders may lose a large amount of cash when the market 'corrects' the share price accordingly.

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Buy Apple, get Enron, and go broke. Way to go Jobs, you just shot your company in the foot and you're about to lose your insurance.

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dude, do you know anything about who grant executive stock options? it's their board of directors, jobs has nothing to do with it. he might has influence, but it's not his call to grant stock options or not.

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Actually Jobs, is a member of the board of directors so he does have some role in the granting of executive stock options. As a director he has a responsibility to ensure the management is running a profitable and legal enterprise for the shareholders. It's still unclear whether the directors were negligent in their fiduciary responsibilities to the shareholders.

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Those artsy types never want to get the paperwork in on time. ;)

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i guess this is just one more thing Macs can do over PCs ....

mac dude says

- Hi, im a Mac, i've just been delisted from nasdaq

Pc guy responds

- PFFFFAHhahAHhaHAHhaHA

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touche!

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AHAHAHAHAHA

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Bye bye Apple, I'd offer up that it was nice knowing you but you weren't worth the money to find out.

LOL

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Hahaha. Being an Apple flamer myself on a few occasions I can fully say that is the most preposterous thing I've ever heard.

As if Apple will get delisted. They'll just sit down to this meeting in a month's time or something, by which time they'll have filled in the form.

And unfortunately their products are cheap *for what they are*.

The really could do with making a low-end one with a screen, and some upgrade ability for the same price (or lower) than the Mac Mini though.

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"The really could do with making a low-end one with a screen, and some upgrade ability for the same price (or lower) than the Mac Mini though."

Err... like the original iMac, or the eMac that followed? I would imagine Apple is well on its way with development of a low-cost eMac equivalent aimed at educational institutions.

As for the Windows fans that posted here, how about a reality check? As a Windows user for 15 years, turned on to OS X only three years ago, it's blatantly obvious which operating system is superior. (I network two PCs and two Macs at home, and now work at a Mac-dominated office with a couple PCs, and don't really mind it a bit.) What's the logic behind ludicrous speculation that Apple will actually be delisted (or fold as one particularly stupid individual suggests above)? With Microsoft leading all corporations in the world (save for maybe Wal-Mart and ExxonMobil) in unscrupulous tactics for unlimited profits, I think PCDUd3Z hardly has anything to laugh about.

PS: Make sure your Ad-Aware, Spybot, Spyware Blaster, and PC-Cillin are updated, and don't forget to install the latest 75 Windows patches that came out in the past 36 hours...

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"I would imagine Apple is well on its way with development of a low-cost eMac equivalent aimed at educational institutions."

They recently (sometime in the last couple months, IIRC) released a "low-end" iMac to take the place of the eMac, which, as you know, ceased being offered in the regular store and became available only in the education store a while back. Same thing with this iMac--it's only in the education store.

Probably still a bit more expensive than the eMac was (I'm too lazy to research right now), but it's a start.

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"blatantly obvious which operating system is superior"

Yep, none of them.

There is no such thing as a "superior" operating system.

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Were you one of those who said Martha Stewart would never be convicted, and even if she she was, she wouldn't see any jail time?

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Martha Stewart, jail.....
canned apples anyone

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Take two products, each with a varying levels of stability, ease of use, susceptibility to viruses and other external security threats, etc. There's no such thing as a superior operating system? That makes absolutely no sense whatsoever.

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But look at what happened with Martha Stewart. She went to jail for 6 months, got a movie made about her, and is now making more money than she did before she went to jail. It seems for rich people going to jail isn't always a bad thing.

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Take OS products each with varying levels of security, stability, ease of use, available software etc.

None are superior to any other in EVERY way, *THAT* would define a superior OS.

Linux: powerful command line, good security, stable, lots of OSS software, not many commercial titles, few games.

Windows: crappy command line, iffy security, stable,lots of OSS software, TONS of off the shelf software, tons of games.

OSX: powerful command line, fairly good security, stable,lots of OSS software, not many commercial titles, few games.

It should make more sense now, none of them are "superior" at anything other than specific tasks.

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You know, after working with a school board that uses thousands...you know, in the area of 6 to 7 thousand macs, I found that they are just as bloody useless as windows. Same random errors that windows gets, everything from not printing for no reason to not connecting to the network for no reason. When you have that many of them, you realize that they are the same piece of crap that every computer is.

The school board also has 5-6 thousand windows pcs on the network, same stupid little problems, same volume, neither OS is better, sorry man.

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To Phill666 who worked "with a school board that uses thousands...you know, in the area of 6 to 7 thousand macs."
I hardly think that an environment where thousands of rug rats are trying to mess up everything they can is a condition you were want to write off an operating system as a failure.
Apple had been down before...it will get past this,too. I understand there are lots of companies caught in this stock-option for employees issue... not just Apple.
Saaaay, didn't our Redmond pals have a little tussle in the courts a few years ago..far more serious thatn this!

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"PS: Make sure your Ad-Aware, Spybot, Spyware Blaster, and PC-Cillin are updated, and don't forget to install the latest 75 Windows patches that came out in the past 36 hours..."

Well, I don't use antivirus and browse with Firefox. Never had a problem. Maybe you could just stop browsing so much porn and you wouldnt have so many problems?

"I would imagine Apple is well on its way with development of a low-cost eMac equivalent aimed at educational institutions."

Apple's edu prices arent competitive compared to Dell. But wtf are you talking about, the other guy was speaking of upgradability and (I guess) standalone display. And you reply with mentions of the iMac and eMac?

"As a Windows user for 15 years, turned on to OS X only three years ago, it's blatantly obvious which operating system is superior."

I owned PCs and Macs, use both at work. Don't like OS X much since I'm more productive with Windows and Linux. I guess there's a reason grocery stores sell more than one kind of vegetables.
If you're not able to understand that someone isnt necessarily an idiot for not thinking OS X is the greatest on Earth you don't deserve much respect.

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OK, so simply put, software aside, OS X is a better OS than Windows, according to your own breakdown, although I definitely wouldn't equate the stability of Windows XP to the stability of OS X. (Also, marketability of software has clearly little to do with the actual quality level of the OS the software is intended to run on.)

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"Well, I don't use antivirus and browse with Firefox. Never had a problem. Maybe you could just stop browsing so much porn and you wouldnt have so many problems?"

I don't have any virus problems at all, because I take the necessarily precautions. With the PCs that I use, auto-updates of the constant Windows security updates, Ad-Aware, and Norton, and I'm fine. The obvious point is that OS X isn't (yet) threatened by this constant barage of spyware and virus attacks. If you don't use any spyware or virus blockers and you're a PC user, than you are clearly doing something magical. Firefox helps, but isn't the key to keeping your Windows clone safe on the web.

"Apple's edu prices arent competitive compared to Dell. But wtf are you talking about, the other guy was speaking of upgradability and (I guess) standalone display. And you reply with mentions of the iMac and eMac?"

First off, Apple's edu eMac sold for something like 400 bucks. Beyond that, I have no idea what deals Apple offers to edu institutions now, nor do I know what Dell sells its notebooks and towers for. With that said, I'm not offering any insight into that, and apparently neither are you.

Secondly, "Wtf" am I talking about regarding the other guy's comment? The original comment was "The really could do with making a low-end one with a screen, and some upgrade ability for the same price (or lower) than the Mac Mini though."

My reply was that I'm assuming Apple will again release a low-end system with a screen (an edu priced eMac or iMac). As for upgradability, all of the new intel-based Macs (except for the intel version of the Mini) are now built to drastically increase the upgradability of the system, moreso than any other system I've seen before. Check out the online vids illustrating the MacBook and Mac Pro's upgradability and you'll see what I mean. Making this ease of hardware upgrades a central part of an affordable Mac is crucial, so I too hope that they work on this design aspect, as was the hope of the original poster.

Now, re the eMac and iMac mention, where's the confusion? As you might recall, you suggest that the original poster was asking about a "(I guess) standalone display", when in fact he was saying that Apple needs to release another low-end system with a built-in display (e.g. eMac and iMac), as opposed to the (low-end) Mini which already requires a standalone display. The point is that Apple already offers a cheap sytem, but you need to buy a monitor for it, so his hope is that they soon come out with a new low-end system with a built-in screen (the equivalent of the old G4 eMac, but with the new intel processor.) It really pays to re-read and actually consider the comment you're responding to before making any claims.

"If you're not able to understand that someone isnt necessarily an idiot for not thinking OS X is the greatest on Earth you don't deserve much respect."

Who said anything about someone being "an idiot" for not thinking OS X is superior? The closest thing that I said regarding anyone being an idiot was this: "What's the logic behind ludicrous speculation that Apple will actually be delisted (or fold as one particularly stupid individual suggests above)?" That question still stands... the speculation of delisting alone displays a real lack of understanding of the market. My statement that it's blatantly obvious which OS is superior is coming from my own perspective and history of use of a variety of OS's, with varying results and subsequent migraines. Are we already to the point where we need to preface each opinion declared as fact with a disclaimer indicating that this may not necessarily be the viewpoint of everyone else on the planet?

And again, you "never had a problem" with spyware or viruses, yet you're a Windows user? WTF indeed...

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Good point... an institutional environment of 10,000 public computer systems is hardly an environment where any OS or hardware system can be effectively judged without more information.

And as for tussles, which one? Microsoft has been in a constant state of litigation for the past 20 years.

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How?? It has less software and nearly no games so as a "DESKTOP" OS it ultimately does much less. If you are now claiming that it's not as stable as XP then that's even less points.

I don't see how you can even remotely argue that it's better.

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