Apple Computer executives have sold stock just before warning earnings


Friday, June 28th 2002, 12:00 am
By: News On 6


SAN JOSE, Calif. (AP) _ Twice in the past two years, Apple Computer executives sold company stock for millions just weeks before Apple warned of disappointing earnings. Each warning sent shares tumbling.

While the sales could have an innocent explanation, analysts consider them unusual because there were no other large stock dumps by Apple executives during the same period. And while stock options often are a major part of compensation, Apple executives tend to be less active sellers than their counterparts at other companies.

``These sells seem to be well-timed,'' said Lon Gerber, director of insider research at Thomson Financial, coming as they did on the eve of two of three Apple earnings warnings over a period that began in August 2000.

``It's always a bit suspicious'' when executives sell before a warning, said Martin Friedman, director of research at Friedman, Billings, Ramsey & Co. Inc.

The computer maker defended the sales, which were questioned in a column last week on a Web site for Mac enthusiasts called Resexcellence.com.

``I can assure you that no executive would have exercised options had they believed we would not meet our original guidance for the quarter,'' Fred Anderson, Apple's chief financial officer, said in a written statement.

Anderson, one of the executives who sold stock prior to the warnings, refused further comment. So did other executives.

The biggest flurry of sales _ 1.9 million shares worth more than $49 million _ occurred between April 22 and May 31, according to Securities and Exchange Commission filings, and were executed by Anderson and five other executives.

During that period, Apple's stock was hovering around $24 on the Nasdaq Stock Market. On June 18, Apple warned that revenues for the quarter that began April 1 would be lower than expected. Shares are now trading around $17.

Back in August 2000, three of the same executives _ senior vice presidents Avie Tevanian and Sina Tamaddon and general counsel Nancy Heinen _ and a fourth, senior vice president of hardware engineering Jon Rubinstein, sold more than 370,000 shares worth more than $21 million.

One month later, Apple issued an earnings warning for the quarter that was to end in two days, saying the company would fall 10 percent short of expectations because of a slowdown in PC sales.

Stunned investors lopped the value of the company's shares in half. Shareholders who had accused Apple and its executives of misleading the public about the company's financial prospects filed a still-pending class action lawsuit that mentions the pre-stock plunge sales by the four executives.

No such clusters of sales occurred near a Dec. 5, 2000 earnings warning, and during 2001 there was little trading activity among Apple executives.

To guard against insider trading, companies often restrict officers from buying or selling their stock within certain time periods, and some executives exercise their options on regular schedules to avoid any appearance of insider trading. Policies on trading windows vary from company to company and are not regulated.

Apple refused to detail its policy and is not required to disclose it; the SEC would not comment on the Apple stock activity.

The law is clear, however, in prohibiting trades on inside information.

Earlier this month, former ImClone Systems Inc. chief executive Samuel Waksal was arrested on charges of insider trading for allegedly tipping off family members to sell stock before the Food and Drug Administration rejection of his company's application for a cancer drug became public.