Previously on "Apple Options Scandal"…

Macworld provides an awesome summary of the Apple options scandal to date if you’re just tuning in.

Mac sales down! Vista to blame?!

As a teacher of the Macalope’s liked to say, “There are no stupid questions, Macalope. Only stupid people.”

Which brings us to eWeek’s Joe Wilcox who asks Did Vista Sap Mac Sales?

“Sap Mac sales”? What conference call were you listening to?

After a year of gains, Mac shipments declined during Apple’s fiscal 2007 second quarter. Is Vista a reason?

Mac shipments declined? What? No, they didn’t. They were up 36%.

Sequentially, overall Mac shipments declined 6 percent, as measured in units and dollars, between Apple’s fiscal first and second quarters.

Oh, fer…

Not the old “quarter to quarter” crap again. C’mon!

And the “years of gains” part isn’t even correct and Wilcox’s own chart shows that. You know, if you’re looking at sequential quarters — apart from asking yourself why on God’s green earth you’re doing that — you might want to actually look at the data before you make generalizations.

“Years of gains”? No. Mac sales declined slightly a quarter ago and, duh, more significantly… exactly one year ago!

But Wilcox has apparently only just heard of this “cyclicality” of which we speak.

The word from analysts: No impact. The declines are seasonable, and typical for Apple and less than fiscal 2006 second quarter.

Uh, you know, Joe, you can actually do that calculation yourself. You don’t need to call some fancy high-paid analyst. Just get the ol’ slide rule out and let ‘er rip!

What’s funny about Wilcox’s piece is the underlying “Uh… no…” tone in all the quotes he gets.

“I wouldn’t read too much into a sequential decline,” said David Daoud, manager of IDC’s personal computing and PC tracker programs.

You can almost hear Daoud scratching his head and speaking… very… slowly…

This one is better, though:

“Sales always decline from [Apple's] Q1 to Q2 because of seasonality,” said Stephen Baker, NPD’s vice president of industry analysis. “A better question would be if the sequential decline this year was more or less than the sequential decline last year.”

“Sales always decline this quarter, you numbskull, and, uh, your question sucks.”

Now, one might argue that Wilcox only asked a question and faithfully reported the answer.

So what’s wrong with that?

What’s wrong is that the question is so misplaced. Did he really think Apple’s results were a bad thing? How could he have missed the multitude of reports that Mac sales soared? How could he have missed Apple’s stock price ripping past 100?



MarketWatch reports Apple’s earnings were up 88% in the second quarter, with sales up 20%. They womped earnings per share estimates by 36%.

Stock’s hovering at 103 in after-hours trading.

Business 2.0′s Owen Thomas is live-blogging the conference call.

The Macalope found this bit about how they’re going to account for iPhone sales interesting (well, as much as accounting can ever be interesting, anyway).

Because Apple is going to keep introducing new software features for free, it’s going to account for sales and earnings from the iPhone on a subscription basis for 24 months after the sale of a handset.

Translation: Investors should keep a careful eye on unit sales and cash flow from operations, not just GAAP revenues and net income.

Also means the company won’t have a repeat of the 802.11n enabler charge issue.

Tim Cook also claims the Leopard delay is a “one-time event”.

Also worth noting:

Apple has started to capitalize some of its software development, which has the effect of depressing apparent R&D spending. CFO Peter Oppenheimer says if you factor the capitalized software back in, R&D spending is going up.

The Macalope has made a mental note to keep an eye out for unwarranted griping that Apple’s R&D spending is going down.

Silly comment by Thomas about why Apple isn’t dropping prices as some component prices decrease:

Cook points out that Mac and iPod sales continued to grow at current prices. I think that means that Apple is not just sticking it to its suppliers, it’s sticking it to its customers, too.

Supply? Demand? Any of these things ring a bell, Owen?

UPDATE: Responding to a commenter who raises the same issue the Macalope did, Thomas says:

Clearly, keeping prices high is not hurting Apple, and executives may be hesitant to drop prices since they may not be able to raise them later if commodity prices rebound. But for now, Apple is getting away with charging customers considerably more for iPods and Macs than it’s costing Apple to make them.


Dude, that’s called margin!

Yeah, customers might not like it, but having a high margin with increasing sales? Investors eat that up with a spoon!

Perhaps the Macalope spoke too soon

Brace yourself again, because Fred Anderson issued a statement today that says in part:

“Fred was told by Steve Jobs in late January 2001 that Mr. Jobs had the agreement of the Board of Directors for the Executive Team grant on Jan. 2, 2001,” Roth said in a statement.

“At the time Mr. Jobs provided Fred this assurance, Fred cautioned Mr. Jobs that the Executive Team grant would have to be priced based on the date of the actual Board agreement or there could be an accounting charge,” the statement said.

Anderson was told by Jobs that the board had given its prior approval and that the board would legally verify it, according to the statement, which added: “Fred relied on these statements by Mr. Jobs and from them concluded the grant was being properly handled.”

Anderson has paid $3.5 million to settle the difference in the options price from the strike date and the date they were approved and $150,000 as a fine.

But, wait… January 2, 2001?

Yes, January 2, 2001.

But Steve’s options for 2001 were granted in October, not January.

Oh. Really?

Yes. So these grants were not for Jobs, they were for other Apple executives.


Are you still here, Billy? The Macalope just needed you as a rhetorical device. You can go now.

OK. Thanks, Mr. Macalope.

Heh. Little scamp.

Anyway, Anderson’s statement goes on to say:

With respect to the October 2001 grant to Mr. Jobs that is also the subject of the complaint, Fred had virtually no involvement as he was not a member of the Board and did not have a formal role in compensation matters pertaining to the CEO. Fred had absolutely no knowledge of any alteration of Board documents and this is reflected by the fact that he is not even mentioned in those charges.

Well, then, that just leaves Nancy Heinen and Steve Jobs. And you will remember that Jobs’ October 2001 grant was the one with the forged board meeting. And now Anderson has indicated that he already made Jobs aware of some of the “accounting implications”.


Now the Macalope is wondering why the SEC has decided not to go after Jobs (assuming the San Jose Mercury News item was correct) unless it’s decided to let him slide on the fact that he turned those options in, which seems unlikely.

If one is looking for comfort in this news, one might take it in the SEC’s willingness to let Anderson settle.

UPDATE: Or, maybe he didn’t: SEC statement (tip o’ the antlers to swift in comments).

The Commission also announced today that it would not bring any enforcement action against Apple based in part on its swift, extensive, and extraordinary cooperation in the Commission’s investigation. Apple’s cooperation consisted of, among other things, prompt self-reporting, an independent internal investigation, the sharing of the results of that investigation with the government, and the implementation of new controls designed to prevent the recurrence of fraudulent conduct.

Although, Apple != Jobs.

Well… at least not in the legal sense.

Another Update: Great post by Fortune’s Roger Parloff with a lot of details that the Macalope has never seen before (tip o’ the antlers to Daring Fireball).

Parloff notes that Jobs was granted new options for October of 2001 not because of the impending introduction of the iPod but simply because his existing options were under water. Still, the introduction of the iPod could be considered a significant enough event to more adequately re-associate Jobs’ compensation with the company’s performance from then on, but that’s the Macalope’s theory.

He owes it all to clean living and fancy footwork

The San Jose Mercury News reported yesterday that it appears unlikely that Steve Jobs will be charged by the SEC in the options backdating scandal.

If the Macalope may riff on David Maynor (without the bad grammar), brace yourself for the flood of anti-Apple posts about why Steve Jobs is getting a free pass.

Long-time readers know the Macalope’s position on this, but there’s a substantial difference in suspecting or guessing that Steve Jobs is getting away with something and knowing that he is.

The Merc notes today that the fickle finger of fate now points to Nancy Heinen and Fred Anderson. So far this game is playing out pretty much according to Apple’s playbook.

But that’s because Apple’s an unstoppable killer marketing machine!

Whew. Aren’t you glad George Ou doesn’t cover the Apple options scandal?

UPDATE: Apple Insider sez the Wall Street Journal reports that Anderson has settled with the SEC. This is more evidence they’re unlikely to go after Jobs. Actually, it’s probably the evidence the Merc’s story was based on.



The Macalope started to write a longer piece about this that went into some of the history of the “wireless controversy” and had charts and graphs of the key players with circles and arrows and drew humorous conclusions that were, at the same time, very thought provoking and whole thing wrapped up at the end leaving the reader more enlightened and somehow more sexually potent.

But then the Macalope though, eh, screw it. We’ve been driving around and around in this neighborhood for months and we’re no closer to finding the freeway. “Indeed” should cover it.


Via Mr. Gruber, the Macalope sees that Gartner — the firm that famously recommended Apple get out of the hardware business — notes that Mac sales were up 30% in the first quarter.

Good advice, fellas!

iPod killers? No! Killer iPods!

The Macalope was too busy last week to give Cara Garretson’s whimsically titled piece for Network World the attention it really deserved.

Can an iPod bring down your company?

Wow! That’d be one big iPod!

You might think that having written that, Garretson would just sign off, Costanza-like, and get out of journalism on a high note. But she’s back! This week, she asks “Won’t Apple please think of the children?!”

Should Apple secure its iPods?

Well, it’s about time someone asked the difficult rhetorical questions. Network World must think iPod security is an important issue because they’ve apparently got Garretson on it full time. Hopefully Apple will soon take responsibility for all enterprise damage caused by Windows viruses and employee theft. That would be the right thing to do.*

Few corporations are likely to ban iPods in the workplace, but whether Apple and other manufacturers of MP3 players shoulder some responsibility to add security to their devices — and how effective that security would be is a growing debate.

See how this works? Network World has turned the laughable “iPod virus” story (the virus that required Linux and self-execution, remember) into a faux controversy. Check out the inset on Garretson’s story — this is their sixth piece on iPod security since the “iPod virus”. Having devoted so much time to it, they can now call it a “growing debate”.


While this unintended use of the iPod is not exclusive to Apple’s device – employees with malicious intent could steal data using any MP3 player, or any removable media for that matter – Apple has sold more than 100 million iPods, making it the obvious choice.

Really, one might be inclined to wonder why a thief would decide to spend $79 on a shuffle when a generic flash drive — one that doesn’t require you to load iTunes and Quicktime on the machine you’re trying to steal data from — with the same capacity can be had for $10.

But, in Garretson’s defense, this is white collar crime we’re talking about. So, it’s appropriate in such situations to ask, “What would Thomas Crown have used?”

One might also point out that sales of flash drives must surely dwarf sales of the iPod, but at this point you’re just trying to impose logic where none exists.

An extensive search of the iPod and iTunes sections of Apple’s Web site turned up no information about setting the devices for data transfer…

You mean like this (elapsed time to discovery: 45 seconds)?

…but did also not warn against the potential for misuse when iPods are set as such.

Also, nowhere on Apple’s web site does it say anything about how you should not throw a click-wheel iPod really, really hard at someone’s head or file a nano into a shiv and stab someone with it. Apple did at least put up a warning about not eating the original shuffle, though (true story).

Now, the Macalope knows a fair amount about the enterprise world. When employees are told that their personal laptops are not to be connected to the corporate network, what’s the alternative they’re given for taking work home?

Using a flash drive.

So, why is it that Garretson is focusing on the iPod and Apple’s supposed responsibility when it’s corporate IT shops that have enabled and often recommended the use of portable drives?

It’s interesting to note that all the quotes in the story largely contradict Garretson’s central thesis — that the iPod is the likely tool for someone to steal data from your company. Not that that stopped her from writing it or Network World for pimping the ridiculous notion that by shipping hard drives Apple is somehow responsible for data theft.

* Note: the Macalope is already on record as saying that Apple’s flip attitude toward shipping a Windows virus on some iPods was unacceptable. This is trying to make Apple responsible for an entire class of problem not of its own making.

Don't hate the phone

Note to all those griping that they don’t care about the iPhone and Apple should be concentrating on OS X and dammit, dammit, DAMMIT!

Products like the iPod and the iPhone are why Apple is still around and, therefore, why the Mac OS is still around and is as awesome as it is.

Macworld’s Peter Cohen makes a similar point.

Yes, it’s bad that Apple told us Leopard would be out in the spring and it will now be out in the fall. Bad Apple! Bad! It’s also a shame that Apple won’t be able to use Leopard to entice PC users who are on the fence about upgrading to Vista. And you can question the veracity of Apple’s contention that the iPhone delayed Leopard (but you’d probably be wrong).

But griping about the iPhone itself — regardless of its relative importance to you, personally — is, ultimately, cutting off your nose to spite your face.

5, 4, 3, 2, 1…


Leopard delayed until October and the Macalope eagerly awaits the jackassery that will surely follow!

Bring it on!

While this is isn’t the end of the world many will make it into, it certainly is a very poor showing on Apple’s part.