Apple's board defends Jobs in stock options case

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Apple reports an 88% profit jump in the second quarter

By Robert Mullins | San Francisco | Thursday, 26 April, 2007

The same day the company posted strong financials, the board of Apple publicly defended CEO Steve Jobs against allegations by a former executive about Jobs' involvement in stock options backdating.

Fred Anderson, Apple's former chief financial officer, has settled with the US Securities and Exchange Commission (SEC) charges that he violated securities laws for his role in backdating stock options. He agreed to pay a fine and pay back US$3.5 million (NZ$4.7 milion) in ill-gotten gains.

But Anderson blamed the backdating on Jobs. Anderson had "cautioned" Jobs that backdated options had to be approved by the board of directors, and relied on Jobs' assurances that had happened, says Anderson's attorney Jerome Roth in a statement.

Seven directors, in a release put out by Apple, say that Jobs cooperated fully with their internal investigation as well as with the SEC's.

"We are not going to enter into a public debate with Fred Anderson or his lawyer," they say in the statement. "The SEC investigated the matter thoroughly and its complaint speaks for itself, in terms of what it says, what it does not say, who it charges, and who it does not charge. We have complete confidence in the conclusions of Apple's independent investigation, and in Steve's integrity and his ability to lead Apple."

Nancy Heinen, Apple's former general counsel, is also charged by the SEC for her role in the backdating case and plans to contest the charges against her in federal court.

Apple has also released its financial results for its fiscal 2007 second quarter, ending March 31. It reported net income of US$770 million (NZ$1.03 billion), or US$0.87 a share, on revenue of US$5.26 billion (NZ$7.05 billion). That's up 88% from net income of US$410 million, or US$0.47 a share, on revenue of US$4.36 billion in the year ago quarter.

The results surpassed estimates from analysts who forecast earnings per share of US$0.64 on US$5.17 billion in revenue, according to Thomson Financial.

Apple says gross margins grew to 35.1% from 29% in the same period last year.

Apple says it sold 1.5 million Macintosh computers and 10.5 million iPod music and video players in the quarter, up 39% and 24%, respectively, from the corresponding quarter of fiscal 2006.

The company anticipates fiscal third quarter revenue of about US$5.1 billion and earnings per diluted share of about US$0.66, says Peter Oppenheimer, Apple's chief financial officer.

The fiscal third quarter, which ends June 30, may include sales of the coming iPhone wireless handheld that Jobs unveiled at Macworld in January. Apple recently said the phone will ship in late June.