Last week’s happenings foreshadowed potential changes in the wind. With the stock option backdating scandal widening, it appears that Apple CEO Steve Jobs may have been caught in the net.
Meanwhile, with the realization that gaming has been driving a lot of the PC industry, and some powerful recent acquisitions by Hewlett-Packard, which bought VoodooPC, and Dell, which acquired Alienware, it isn’t surprising that the industry appears to be expanding its focus to get couples to play together.
Finally, Windows Vista RC2 — the “final” release candidate — came out and we’ve been testing it like crazy so it’s time to take a look at the results.
When Ethics and Greed Collide
It is hard to have much sympathy for the folks caught up in the industry-wide stock option backdating scandal. This is a case where folks did something that certainly looked unethical, but they believed was legal, so they did it anyway. Only later did they discover that the practice is illegal, too.
Whenever you have a large number of companies accused of doing something illegal you immediately know that at the core of the problem are rules that aren’t clear. That was a major part of this problem. Options backdating should have been avoided anyway, though, because it is clearly unethical. That’s because it puts the executive, often someone who is in the decision path for the options, in the position of granting himself unique benefits denied the rank-and-file employees and stockholders.
In effect, backdating allows someone to go back in time, pick the absolute lowest price the company stock was trading at and lock in the option to buy the stock at the future time of their choice at that favorable price, assuring a profit that typically wasn’t reported anyplace else. This is kind of like executives giving themselves big raises but concealing those raises from the investors.
From the company’s perspective, this is a way to provide high compensation without actually using cash, and from the employees’ perspective, this avoids income taxes, since typically options are not taxable. The folks that are screwed are the other stockholders, including employees who don’t get these incredibly favorable deals.
Taking the Heat
Apple was caught up in this probe and initially reported that the issue would have no material impact on it. However, the firm later changed its story because it turned out the practice was more widespread than previously thought. Apple did indicate that Jobs was not likely to be impacted because his initial grant had been reversed. This recently proved to be untrue, however, and it now appears that Jobs may have benefited to the tune of US$75 million — which has appreciated to nearly half a billion dollars.
According to Bloomberg, the reason Jobs’ options were cancelled is that they were under water — in other words, worth less than zero, even with backdating. These were replaced with new options which, because the stock continued to fall at the time, were worth nothing very quickly. These last options, however, were traded for $85 million in stock grants, creating a line between the backdated options and the grants.
If the Securities and Exchange Commission makes that same connection, Jobs will clearly become vulnerable. The whole string of events where worthless options were traded repeatedly for properties that have value looks incredibly unethical to me, even though that practice is also far from uncommon.
Finally, even if Jobs isn’t forced out — which despite all of this is still relatively unlikely — we might want to worry about the potential for stress like this to cause the return of cancer to someone who had been in remission. We just saw something like this happen to HP’s ex-Chairman Patricia Dunn. I doubt this lesson will be lost on Jobs, who may be making some difficult choices this year. And this has already become a year characterized by folks making bad choices.
Gaming Goes Co-Ed
On a much lighter note, for those of us who love to play video games (like me), a common problem exists among us: lack of support for our vice from our significant other. This is not a problem for everyone; my brother and his wife, for instance, play as a team in “World of Warcraft,” as do both of his kids and their spouses.
Unfortunately, my wife thinks this stuff is all a big waste of time. This is probably due to the last time I took her gaming where she earned the nickname “Target” while running around in circles and setting a record for dying the most deaths in the shortest period of time.
There was clearly a need for a focused effort to bring women into gaming and get them comfortable playing shoulder-to-shoulder with their significant other, or working out relationship problems with virtual WMDs (rather than kitchen utensils).
VIA has come to our rescue with a new event called “Couples, Computers and Gaming.” Planned for Saturday, Nov. 11, in San Francisco, this will give some of us the opportunity to bring our wives in and get them trained as gamers.
Women in Games International is co-sponsoring the event and at least one lucky woman will get personal training so she can, at the end of the event, pound her significant other into the virtual dust — something I understand a number of the female professional gamers who will be there do regularly.
I’ll report on what happens next month, since both my wife and I plan to attend. I have little doubt she is looking forward to a little payback. Until then I’ll be practicing my frag skills and excuses.
Vista RC2: Almost Cooked
While the anticipated head-to-head comparison between Apple’s Leopard and Windows Vista will have to wait until around this time next year, Microsoft has reached a major milestone with the release of Vista Release Candidate 2. This is supposed to be the final release candidate and with the exception of some minor tuning, it should be very close to what we’ll see on the market next year.
I’ve been running this on a number of systems and the good news is that it is one of the best upgrade experiences you are likely to get with Windows. If you have an older system or one with an integrated graphics card, that’s the very first thing you’ll want to upgrade. I had a lot of problems with ATI drivers which should be corrected by launch but the Nvidia stuff worked out of the box. I tried a new 7950GT Nvidia card on a relatively new AMD-based system and the installation was relatively painless. But when I tried a three-year-old Intel Extreme Edition product I got a black screen.
The good news is the recovery was simple, but Vista will clearly be safest on products that are relatively new and that have the “Ready for Vista” sticker on them. Right now it looks like Nvidia has done a very nice job making its stuff work seamlessly through an upgrade, so I’d tend to favor Nvidia for Vista-ready machines.
Once up and running, Vista sure is attractive. It takes a little while to rediscover where some of the settings are but after a week or so of use I can move seamlessly between XP and Vista without a problem. Office 2007 has been a nice surprise as well and after a few days — and an update to Office XP — I’m able to move between the Office versions easily as well.
There is a reasonable chance you’ll want Vista after it ships early next year so if you are buying new hardware it would be best to favor that which is Vista-ready, just to protect your investment. I’d suggest the same thing with Leopard but Apple doesn’t have a Leopard-ready program — and they really want you to buy new hardware anyway when that puppy ships next year.
Rob Enderle is a TechNewsWorld columnist and the Principal Analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.