Investors back Jobs as Apple stock probe widens

Investors and Wall Street supporters of Steve Jobs rallied to defend the visionary founder of Apple Computer, as a growing storm over manipulated share options and forged documents threatened to engulf him.

The company's shares closed 0.8 per cent lower yesterday, amid reports that federal authorities are investigating a massive grant of share options to Mr Jobs and that documents were forged to give the misleading impression that Apple's board had approved the grant.

Apple insisted yesterday that it stood by its October statement that no current board members were guilty of misconduct, but it has promised to provide an update on the scandal before the end of today.

Analysts tried to calm fears that new revelations might force the resignation of Mr Jobs as chief executive, robbing the company of the technological vision and marketing genius that has made the iPod one of the most successful gadgets of all time.

Gene Munster, technology sector analyst at Piper Jaffray, said he could not believe Mr Jobs was personally involved in manipulating stock options grants to bolster executive pay. "People want Steve Jobs to be Apple chief executive and he probably didn't have anything to do with this," he said. "He is above a lot of this noise, typically much more focused on the business. He is not on the compensation committee. I think he will be found clear of everything."

A newspaper report yesterday claimed that Mr Jobs received a grant of 7.5 million share options in 2001 without the required approval from the full Apple board. Documents drawn up later were forged to give the impression that the board had in fact met and approved the grant, as Apple's remuneration procedures insist.

Apple has already said that an internal investigation raised "serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants". The new report puts pressure on Mr Jobs and other continuing board members to say if they knew that remuneration procedures were not being properly followed.

Jonathan Hoopes, analyst at ThinkEquity Partners, said the share price fall was unjustified because Mr Jobs' position was not in danger.

"If in fact a current manager did misconduct him or herself and Apple knows about it, it would be required to put out a press release. Since we haven't seen anything like that, we are right back where we were in October and the recent flurry of activity is much ado about nothing. My position before was that Steve Jobs is unlikely to lose his job, and that is still my position today."

Apple has admitted that some share options grants to executives were secretly backdated to days when the share price was low, maximising the potential profits for their holders. Mr Jobs, it said, was aware of some of these grants but "did not receive or otherwise benefit from these grants".

The 7.5 million options at the centre of yesterday's claims were given up by Mr Jobs in 2003 when they were not showing a profit. He was later granted special Apple shares instead.

It is just a few months since Mr Jobs celebrated the 30th anniversary of founding Apple, which has revolutionised the technology sector not once but twice - first through the Apple Mac computer and then with the iPod. He was sacked as its chairman after a boardroom power struggle in 1985 but returned as chief executive when it was deep in financial trouble in 1996, and has since been credited with saving the company.

Apple will require all of Mr Jobs' legendary marketing skill next year as it launches its top-secret but much-hyped "iPhone", combining its ubiquitous digital music player with cell-phone technology. Many fans of Apple products are speculating that Mr Jobs could unveil the new product at next month's Macworld technology convention.

The absence of a clear plan for a successor to Mr Jobs has most worried Wall Street as the drip-drip of revelations has continued.

Roger Kay, founder of Endpoint Associates, the technology consultancy, said: "Steve Jobs is like a conductor. Apple may have its brilliant cellists and violinists, but it still needs a guy to tap his baton and count them in on three. His role is as a critical experimental judge of new products.

"This is one of the few companies where the chief executive is the company. He wouldn't let anyone as creative as him anywhere near the steering wheel of the company. It would be a disaster for Apple to lose Steve Jobs at this point."

Heavy demand causes delays at iTunes store

Excited music lovers armed with their new iPods overwhelmed Apple's iTunes online store in the days after Christmas, causing long delays and difficulties getting on to the site.

Discussion forums were swamped with complaints about the service from people who said they had to wait up to 20 minutes for a single track to download, if they were able to connect to the store at all.

Five times as many people as last year visited the iTunes store in the post-Christmas period, according to Hitwise, a market research group that tracks online traffic.

The iPod was again one of the most popular Christmas presents on both sides of the Atlantic, and iTunes gift vouchers have also ballooned in popularity as the number of iPod users grows. The Apple store was the fourth most visited website in the Hitwise Retail Index on Christmas Day, with visitors up 413 per cent on last year.

"For the third holiday season in a row, the iPod has been the must-have Christmas gift," said Bill Tancer, general manager of global research at Hitwise. "Competitive offerings have not yet succeeded in capturing the attention of listeners, and the surge in visits to the Apple Store shows that iPod owners are also engaged in filling and accessorising their new devices."

Dan Frakes, a senior editor at Macworld magazine and playlistmag.com, said he and some colleagues were unable to access the iTunes store or received error messages when they tried to download songs early this week.

However, others breezed through the process hassle-free, and Mr Frakes successfully downloaded songs again on Wednesday. "The store itself was working, there was just too much traffic," he said.