Journalists rule the world!

The Economist authors one of the stupidest pieces the Macalope has read on the options scandal (and that’s saying a lot!).

The piece pimps Larry Ribstein’s Apple Rule which states that:

The Apple Rule provides for an exception from corporate criminal liability when a popular business executive is accused of, or presides over a company that is accused of, misconduct. “Popular” is defined as “liked by journalists.”

This rule is actually just a means to an end for Ribstein, and that end is ending the criminalization of impromper backdating.

So are we going to lock up America’s most popular entrepreneurs, make untenable distinctions in who gets prosecuted, or finally understand that the criminal justice system is a wildly inappropriate way to deal with agency costs like those involved in backdating?

See, lying to your investors is just an “agency cost”!

Uh, no. The problem investors have is not with the amounts that were awarded, it’s with the fact that they weren’t disclosed.

Look, the Macalope may think that some executives are overpaid in this country, but it’s pretty much just at companies that are in the toilet, so he’s not some anti-compensation nut. He just believes that executive compensation should be properly documented and disclosed and that’s the crime we’re talking about.

Here Ribstein uncritically regurgitates the defense’s position in the Brocade case that the rule they violated was “obscure” and everything they did was “in good faith.” It’s true that in this case the defendants did not personally benefit from the improperly backdated options, but they approved scores of them and failed to report them adequately (although the defense is attempting an interesting maneuver in regard to that).

But they didn’t benefit! Well, if they’re propping up the company’s reputation by buying talent with an expensive mortgage, they could have benefitted. Also, while it’s an overblown analogy, if someone robs a bank and gives the money away, they still robbed a bank.

Getting back to the Economist, riffing Ribstein it claims that Steve Jobs has not been charged with a crime because he’s popular among journalists.

Is the basis of that premise — that he’s popular among journalists — even true? Which journalists? Surely not John Dvorak.

And even if it is, who believes U.S. attorneys really take their marching orders from journalists? Why, egotistical journalists!

Quod erat demonstrandum!

The Macalope has long subscribed the belief that the further up the journalism ladder one climbs, the more likely one is to act like one of the eponymous characters from the movie Heathers: spoiled high school girls who believe the whole world revolves around them.

Point of fact, the reason there have no charges filed against Steve Jobs is not because of his popularity. It’s probably because no one’s uncovered any evidence that he did something wrong (and please take note that this comes from a blogger who has already been on the record as suspecting that Jobs probably did do something wrong). Or it’s because Apple only finished its own investigation last quarter. Or — hey, here’s a thought — because the Bush administration recently fired Kevin Ryan, the U.S. attorney in charge of the investigation. Maybe, just maybe, the SEC and U.S. attorneys have their own set of motivations, which could include but is not limited to self promotion, timing and a wacky little thing we like to call “justice”.

Nah! It’s gotta be because some journalists likey the Steve!

The hubris on display here is truly astounding.

Still, that leaves open the question of if, and how, a business executive can get to be so popular with the media that investigators steer clear.

Wow. The editors at the Economist sure thinks a lot of their profession. In order to avoid prosecution, a CEO needs to be popular with — not shareholders, not the public, not the government — journalists.

After pumping up the importance of its own profession, the Economist concludes:

Our rule: if a criminal prosecution is likely to hurt a company’s share price, then don’t prosecute.

That’s an absurd blanket statement. God knows the Macalope’s not arguing that Steve Jobs should be sent up the river sans paddle if he were ever to be charged and convicted of attempting to increase his largesse at the expense of Apple shareholders, but Ribstein and the Economist are arguing he shouldn’t be punished at all.

There is a middle ground here and we’ve already discussed it, but the words of Alan Murray apparently bear repeating.

If Mr. Jobs participated in backdating options, he should be punished. To let him off the hook would send a terrible signal that some people are exempt from the rules or above the law.

But any punishment that hampers his ability to continue running the company would be a mistake. That is punishing the victim, and only compounds the crime.

In other words, fine him, leave him as CEO and move on.

Is the government being overzealous in its pursuit of these cases? The Macalope supposes it’s possible. But turning a blind eye to executive malfeasance isn’t exactly a solution.

The Macalope holds an inconsequential number of Apple shares.

Yes, you're being a jerk

According to Paul Thurrott, a Bloomberg report that the iPod took 72.7% of the U.S. retail market share vastly understates its position since it doesn’t take into account direct sales or sales at Wal-Mart or warehouse clubs.

OK, that’s not exactly what he said…

Decision time

There seems to be a bit of disagreement over Vista’s launch and what it means for Mac market share.


According to Information Week, at least two analysts think it’s an opportunity for Apple.

“We think Vista is good for Apple,” ThinkEquity Partners financial analyst Jonathan Hoopes says in an e-mail. “As people upgrade their PCs, we expect them to increasingly consider the Mac alternative.”

That’s pretty much what the Macalope’s been saying. Vista forces many PC users into a buying decision.

But Paul Thurrott last week advised against such irrational exuberance.

In fact, there are reasons to believe that PC sales will grow dramatically in this very quarter because of Vista’s release. So it’s much more believable to think that Apple’s market share will actually be closer to 3 percent, or even less.


However, I’d argue that Vista is quite obviously a threat to Apple because it further closes the gap between Windows and OS X in the eyes of the world (and, in reality, Vista exceeds OS X in many areas). And one might make the argument that Vista is good enough to cause some Mac users to switch back to Windows.

Up? Down? It’s all so confusing! Who are you gonna trust?

Well, if you’re the Macalope (and you’re not)*, you’re going to trust Hoopes. Sure, Thurrott’s right that no one should count their chickens before they hatch but this isn’t poultry, it’s prediction.

Now, the Macalope’s been burned before and, while it’s tempting, he’s resisting the urge to put any stock in his own anecdotal evidence that his relatives, friends and acquaintances are increasingly asking him “Now, tell me about these ‘Macs’ again?”.

Why? Because he tends to hang out with remarkably charming, erudite, witty, intelligent and sexy people. In other words, even if they’re currently PC users, they already fit nicely into the Mac user demographic, so they’re probably not representative of the PC-using population as a whole.

That said, there’s no denying that Microsoft made a strategic error in giving itself five years to get Vista out the door. Now it’s coming back to it’s customers and saying “Hey! Remember me?! I sold you that OS you’re using five years ago? Yeah, well, I’ve got a new one now and you’re going to have to buy a new machine to run it but I’ve got this great wizard that will step you through all the different versions to help you pick which one is right for you!”

It’s hardly irrational to speculate that Microsoft might get a few doors slammed in its face.

The Macalope will do Thurrott the courtesy of not even replying to his speculation about users switching from the Mac to Vista.



* Or are you?!

Free .Mac?

Many of you may be wondering where the Macalope was last week. Every so often the Macalope likes to “sharpen the saw” as Covey would say and go to a conference where he can learn and reenergize!

It’s almost always a mistake.

This time the Macalope decided to go to this big mythical creatures conference at the Sylvan Glen (“Sylvan Glen” sounds like a mythical place but it’s actually a Courtyard by Marriott out on Highway 80). The conference is supposed to be a way for us all to get together and talk about the issues of being mythical.

For example, it’s really hard to build up a line of credit. Imagine being a faerie and having to put your address as “Under the toadstool down by the babbling brook in the Great Green Wood” on a loan application. That doesn’t look good. It’s vague and somehow sounds like you spend most of your day stoned.

Anyway, there’s this big reception at the conference and the Macalope is talking to this magical half-elf with plus five hit points and — as will often happen when you have a head shaped like a Mac — the subject turns to Apple. As it turns out, the magical half-elf with plus five hit points is also a Mac user and has some familiars who provide him insider info on Apple.

So, we’re sipping our white wine and wearing our “HI, I’M the Macalope” and “HI, I’M the magical half-elf with plus five hit points” badges and he starts talking about portable home directories.

Unless you’ve been living under a toadstool down by the babbling brook in the Great Green Wood, you know that Leopard is going to feature some amazing advancements of this technology. But out of nowhere the magical half-elf with plus five hit points says “Of course .Mac will be free again to tie it all together.”

The Macalope did a white wine spit-take which probably surprised him a bit because he immediately started backing off that assertion, saying “Well, some part of it will be free.”

But it does make sense. It’s not like Apple’s making a ton of coin on it anyway and if Leopard is going to highlight the ability to access your home folder anywhere, what better way to make that possible for everyone than .Mac?

Uh, other than something that’s reliable.


"It was hell," he recalled

Jupiter Research’s Microsoft’s Jupiter Research’s Michael Gartenberg is returning to the fold after a grueling…

…three-week stint at Microsoft.

The Macalope was truly dismayed to read last month that Gartenberg was leaving Jupiter as he is an excellent analyst and, well, he just hates to see anyone good go to Microsoft.

While Gartenberg may have quickly realized that the fit between plain-spoken analyst and spin-happy corporation is not a good fit, the Macalope also speculates that Jupiter made him a late but attractive counter-offer. In his premature Jupiter swan song, Gartenberg wrote:

My current job is great, my boss is wonderful and I was compensated OK.

Ouch! “Great.” “Wonderful.” “OK.” One of these things is not like the others.

Whatever the reason, the Macalope applauds the ultimate decision.

Well, assuming it is the ultimate decision.

Maynor goes for a do-over

The Macalope was supposed to have a week off and then this has to happen:

David Maynor demoed crashing a MacBook at Black Hat DC.

“I screwed up a bit [at last year's Black Hat in Las Vegas]. I probably shouldn’t have used an Apple machine in the video demo and I definitely should not have discussed it a journalist ahead of time,” Maynor said in an interview after his demo.

“I made mistakes, I screwed up. You can blame me for a lot of things but don’t say we didn’t find this and give all the information to Apple.”

Glenn Fleishman has more.