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Google CEO declines Apple options grant

post #1 of 27
Thread Starter 
Google chief executive Eric Schmidt has declined stock options offered to him as a new director of Apple Computer's board of directors and will instead buy shares on the open market, Apple said on Friday.

Schmidt was elected to become an Apple director during an Apple board meeting on Tuesday, bringing the Cupertino, Calif.-based company's director head-count to eight.

"In connection with his appointment, Dr. Schmidt has declined the automatic stock option grant to purchase 30,000 shares to which new directors are entitled under the Companys 1997 Director Stock Option Plan," Apple said in a filing with the Securities and Exchange Commission on Friday,

Instead, Schmidt intends to purchase 10,000 shares of Apple common stock on the open market, the company said.

Apple is one of many Silicon Valley corporations under investigation by the SEC due to irregularities discovered with stock option grants awarded to several current and former executives and board members.

The irregularities have spawned several investor lawsuits and sent some Apple execs scrambling to obtain council.
post #2 of 27
That's odd. Why doesn't he exercise this "right" accorded to all board of directors members? Instead, he opts to buy only 10,000 shares on the open market? Will he be reimbursed by Apple for this purchase? Odd... just odd.

Not sure these are the plans of one being primped for eventual takeover of the CEO post (not that I believed that anyway).

Proud AAPL stock owner.

 

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post #3 of 27
That is a little weird, I wonder if it is in part due to the options fiasco. Do options expire? I don't see anything wrong with accepting the options and not exercising them until the current issues are resolved.
post #4 of 27
He probably doesn't want to be involved in any SEC charges in his new position with Apple. Still seems strange though.
post #5 of 27
Well, I guess its better for Apple if he doesn't exercise his right to buy them, and uses his own money. Are companies allowed to buy their own shares - if not I doubt he'd be reimbursed for them...
post #6 of 27
Oh, c'mon, he's not literally going to be using his own money to buy the shares. Probably some nice little tax shelter he has set up will buy it for him.

Proud AAPL stock owner.

 

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Proud AAPL stock owner.

 

GOA

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post #7 of 27
maybe appleinsider has started inventing bogus stories about board members doing preposterous shebangwengs.

nah, maybe he just declined because of the stock options washbingula. sorry, i make up words after midnight.
post #8 of 27
Quote:
Originally Posted by SpamSandwich

Oh, c'mon, he's not literally going to be using his own money to buy the shares. Probably some nice little tax shelter he has set up will buy it for him.

I don't think you know what you are talking about. What kind of tax shelter?

He has so much money that $50,000 worth of shares is not worth any extra thought beyond a call to a broker. He probably just didn't want to deal with any potential headaches for so little money.

Even if there was a tax shelter like you are talking about, which I doubt because I have looked and not found anything legal, it would probably cost more than $50K to set up.
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post #9 of 27
Quote:
Originally Posted by SpamSandwich

Oh, c'mon, he's not literally going to be using his own money to buy the shares. Probably some nice little tax shelter he has set up will buy it for him.

the comments on this item so far reveal little understanding of business. i quoted this one just as an example: if the guy's got a tax shelter, it's an investment set up to finagle thru between the lines, conforming to the law (if it's successful) while maximizing the tax benefits. that's all a tax shelter is. it's STILL the guy's money.

it reminded me of one of my friends, who upon graduating fromlaw school and setting up his own practice, was fascinated by the fact that NOW, when he bought office equipment and furniture, etc., it was a business expense and would reduce his business tax by 25%, effectively reducing teh real cost to him of his purchase by 25%. Yes, people stretch to declare some purchases that are questionably business-related (that car? the two week trip to Honolulu that includes a one-hour meeting with a business client? etc) but they're still spending REAL money, THEIR money--assuming they own the business or int he case cited here, the tax shelter. My friend--to get back to that story--was so excited by the concept that he was getting 25% of the purchase price "back" in tax savings that he went on an ill-advised spending spree. He, too, had forgotten it was his money he was spending, whether at 75 cents on the dollar or not.

Sorry for the dissertation! \ But my read would be the guy's distancing himself--probably wisely--from a tainted options story underway at apple. The rest of the speculation in the first half dozen comments here, at least, suggest we're better computer fanboys than we are biz analysts.

peace to all
terry
post #10 of 27
Quote:
Originally Posted by e1618978

He has so much money that $50,000 worth of shares is not worth any extra thought beyond a call to a broker. He probably just didn't want to deal with any potential headaches for so little money."

wow, e-xxxx, I think your conclusion of wanting to avoid headaches is right on. but 10,000 shares of apple is 10k x 68.38/share=$683,800, not 50k, quite a difference there. Still, for the CEO of google, you might still be right, that that sort of investment doesn't require much thought beyond a call to a broker.

Even at $683,000, remember the issue for the fella, the money at risk, is simply how $683k invested in apple will fare compared to what other investment he might put it in, he'll almost certainly simply move money from another investment to the apple stock. True apple's been a volatile stock in the past year, but so are some other investments. So the true bottom line for the fella's net worth is, as e-xxxxx notes, is pretty insignifiant, just the difference on the return on the apple stock compared to whatever else he'd have it invested in. Plenty of shrewd investors own apple stock anyway.

peace
td
post #11 of 27
Quote:
Originally Posted by e1618978

I don't think you know what you are talking about. What kind of tax shelter?

He has so much money that $50,000 worth of shares is not worth any extra thought beyond a call to a broker. He probably just didn't want to deal with any potential headaches for so little money.

Even if there was a tax shelter like you are talking about, which I doubt because I have looked and not found anything legal, it would probably cost more than $50K to set up.

He could create a defined contribution plan http://en.wikipedia.org/wiki/Defined...ribution_plans, for an LLC that he and his wife would own for stock purchases. The LLC could be a property acquisitions company that happens to own his house, for example.

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Proud AAPL stock owner.

 

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post #12 of 27
Quote:
Originally Posted by rtdunham

But my read would be the guy's distancing himself--probably wisely--from a tainted options story underway at apple.

Bingo. That's all there is to it.
post #13 of 27
Quote:
Originally Posted by SpamSandwich

He could create a defined contribution plan http://en.wikipedia.org/wiki/Defined...ribution_plans, for an LLC that he and his wife would own for stock purchases. The LLC could be a property acquisitions company that happens to own his house, for example.

If he did that, it would still be his money that he was spending. Also, the benefit of deferred compensation plans is to delay taxes until you are in a lower tax bracket later in life - this guy will be in the top bracket no matter how long he waits, there is no benefit to him in a deferred compensation plan. Not only that, but there is a 40K limit in the wikipedia article you linked to.
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post #14 of 27
It's great as a PR move. Every thing I see leads me to believe that Eric Schmidt is going to be the next CEO of Apple when Jobs either retires to leaves for a position at Disney.
post #15 of 27
Quote:
Originally Posted by BenRoethig

It's great as a PR move. Every thing I see leads me to believe that Eric Schmidt is going to be the next CEO of Apple when Jobs either retires to leaves for a position at Disney.

So when, in your view, might Schmidt become CEO? Within 5 years?

There does seeem to be a funky vibe coming from Apple's recent moves, isn't there? They immediately settle their outstanding lawsuits... sort of understandable... Schmidt comes on board, but refuses gratis Apple stock... um, OK... Jobs not so long ago had an operable health scare, which may still be affecting his ability to make public presentations... They keep delaying expected (note I didn't say "wished for") product refreshes...

Proud AAPL stock owner.

 

GOA

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post #16 of 27
Quote:
Originally Posted by SpamSandwich

Schmidt comes on board, but refuses gratis Apple stock...

He wasn't offered stock, he was offered given stock options. What that would have done was allow him the ability to buy stock later, but at the price of the stock when the option was written. On the face of it, it looks silly to turn down something though there may be some non-obvious shrewdness going on, which might be a good idea to avoid any suspicion regarding the back-dating issue and deferring the option grant until that matter is settled.
post #17 of 27
Quote:
Originally Posted by SpamSandwich

So when, in your view, might Schmidt become CEO? Within 5 years?

There does seeem to be a funky vibe coming from Apple's recent moves, isn't there? They immediately settle their outstanding lawsuits... sort of understandable... Schmidt comes on board, but refuses gratis Apple stock... um, OK... Jobs not so long ago had an operable health scare, which may still be affecting his ability to make public presentations... They keep delaying expected (note I didn't say "wished for") product refreshes...

I'll say this, if Steve Jobs found a person who had similar views and he could trust I think he would step down as CEO but remain as president and chairman of the board. In other words he'd have more time for other things, but the buck would still stop with him. Assuming a Apple/Google merger, Schmidt just seems like the right guy. He's used to dealing with innovation and creativity, yet he is a lot more practical minded than Steve Jobs. I think Steve's vision with his management ability could take Apple to a whole new level. I might also add that he joined google on the board before becoming CEO there.
post #18 of 27
Quote:
Originally Posted by e1618978

If he did that, it would still be his money that he was spending. Also, the benefit of deferred compensation plans is to delay taxes until you are in a lower tax bracket later in life - this guy will be in the top bracket no matter how long he waits, there is no benefit to him in a deferred compensation plan. Not only that, but there is a 40K limit in the wikipedia article you linked to.

It would be stock money he sold from Google.

What's the price of Google currently? "His Money" is a loose term. It's money garnered from the options granted to him at Google.

By not accepting any stock from Apple he doesn't get exposed to possible investigations with Google.

However he chooses to filter his money is less relevant than how he shields himself from the current Silicon Valley stock option investigations that are running around like a virus.
post #19 of 27
He is not taking the option to avoid the APPEARANCE of being involved with any kind of scandal at Apple. He is the CEO of another company and has to be concerned about how his actions may be INTERPRETED.

I believe he is buying stock with his own money to SHOW his confidence in AAPL.

If the board can decide to give Steve a private jet, they could also decide at a later date to reoffer the option once things have blown over with the SEC.

As far as speculation of him being the next CEO...unlikely.
An Apple-Google merger...unlikely

The influence that board members have is exaggerated.
This does set the stage for interesting partnerships between the two company.

Apple=hardware + OS + media
Google=software + search + advertising

Two very complementary companies.
post #20 of 27
Quote:
Originally Posted by Johnny Mozzarella

The influence that board members have is exaggerated.
This does set the stage for interesting partnerships between the two company.

Apple=hardware + OS + media
Google=software + search + advertising

Two very complementary companies.

I agree with you. But isn't one of Sony's execs on the board? and what have those two companies worked on together lately? laptop batteries?

i suppose there's cooperation, too, though, on new BluRay drives. Anything else?

terry
post #21 of 27
Quote:
Originally Posted by rtdunham

I agree with you. But isn't one of Sony's execs on the board?

terry

Nope, No SONY.
http://www.apple.com/pr/bios/bod.html

Sony is out of touch and in BIG trouble.
Sony needs Apple.
Apple doesn't need Sony

Bill Campbell, who is currently on the board is the Chairman and former CEO of Intuit.
While it is true that his presence on the board had no effect on the lousy state of Quicken for Mac.
But don't forget that QuickBooks was dropped for 5 years and came back in 2002.
post #22 of 27
Quote:
Originally Posted by Johnny Mozzarella

This does set the stage for interesting partnerships between the two company.

Apple=hardware + OS + media
Google=software + search + advertising

Two very complementary companies.

You forgot one thing... Google= software + search + advertising + wireless internet access(!)

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GOA

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Proud AAPL stock owner.

 

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post #23 of 27
Quote:
Originally Posted by Johnny Mozzarella

Apple=hardware + OS + media
Google=software + search + advertising

Two very complementary companies.

If you look at where each company makes most of their money, it really boils down to Apple being a hardware company and Google being an advertising company.
post #24 of 27
Quote:
Originally Posted by SpamSandwich

You forgot one thing... Google= software + search + advertising + wireless internet access(!)

The wireless internet access is interesting because it requires hardware.
What if Google ordered 500,000 custom designed Airport Express base stations to build out their wireless network.
Apple already has a killer design and excellent management software.

What if the iPod becomes a ubiquitous wireless information appliance for the GoogleNet.
post #25 of 27
Quote:
Originally Posted by Johnny Mozzarella

The wireless internet access is interesting because it requires hardware.
What if Google ordered 500,000 custom designed Airport Express base stations to build out their wireless network.
Apple already has a killer design and excellent management software.

It would definitely have to be a ruggedized version, so the appearance would go out the window.
post #26 of 27
Quote:
Originally Posted by JeffDM

If you look at where each company makes most of their money, it really boils down to Apple being a hardware company and Google being an advertising company.

If you extrapolate Apple's future prospects, that could very quickly change.
currently Apple sells iPods and makes a nice profit on each one.
This may not last. Cellphones may compete and force down prices.

It is a matter of time before Apple starts selling movies online.
They may have some hardware for watching the movies to profit from as well.

In the future Apple may also start selling eBooks and eMags online as well.
They may also have hardware for viewing eBooks.

These devices may eventually turn to the razors and blades model the cellphone industry uses.

Cingular gives away the phone and makes money on the 2yr contract
Microsoft loses money on the XBox and makes it back on the games and XBox Live.
Tivo has recently moved to a similar model as well.

In a couple years you might be getting a free iPhone when you sign up for a 2yr contract.
Who wants to buy an iPod for $299 when you can get a new iPhone every 2 yrs?
post #27 of 27
Quote:
Originally Posted by AppleInsider

The irregularities have spawned several investor lawsuits and sent some Apple execs scrambling to obtain council.

Since the execs may be in some legal hot water, I think they probably ought to obtain counsel as well.
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