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Schaeffer's Market Observation Features Apple Computer and Goodyear Tire & Rubber

Posted on: Friday, 29 December 2006, 18:00 CST

Today's Market Observation features Apple Computer (NASDAQ:AAPL) and Goodyear Tire & Rubber (NYSE:GT). Schaeffer's Market Observations are market-based reports that provide insight and analysis from a unique and unbiased perspective. Market Observations are published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. To receive a free email notification each time a new commentary is written about one of the featured stocks or any of your favorite stocks, click on the following link: http://www.schaeffersresearch.com/redirect.aspx?CODE=PROAW13M&PAGE=1.

Apple Computer Takes $84 Million Non-Cash Charge in 10-K Filing

Shares of Apple Computer (NASDAQ:AAPL) were seen higher by about three percent in pre-market and European trading this morning following the company's 10-K filing with the Securities and Exchange Commission (SEC). According to the company, CEO Steve Jobs was aware of favorable stock-option grant dates, but the CEO did not personally benefit from the grants.

Digging into the filing, AAPL stated that a special committee appointed to look into stock-option grants concluded that while Jobs was "aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications." Furthermore, the committee reported that there was no evidence of misconduct by current management.

However, it was noted that the investigation raised serious concerns regarding two former officers in connection with the accounting, recording, and reporting of stock-option grants. Of 42,077 stock-option grants made on 259 dates between October 1996 and January 2003, 6,428 grants on 42 dates have been deemed as not the proper measurement dates, Apple reported. The company also said that it has informed the SEC and that the U.S. Attorney's Office has been informed of the results of its probe.

As a result of the probe and ongoing investigation into stock-option grants, Apple said that it is restating earnings, after tax, by $4 million, $7 million, and $10 million in fiscal years 2006, 2005 and 2004, respectively. The firm is also taking an $84 million non-cash charge as a result.

Following the release of Apple's 10-K, the company's board expressed its "complete confidence" in Jobs and the senior management team in a statement released by Al Gore, chair of the special committee, and Jerome York, chair of Apple's audit and finance committee.

Goodyear Tire Makes a Deal

One stock likely to see some action in today's lightly traded session is Goodyear Tire & Rubber (NYSE:GT). This morning, the company inked a three-year contract with the United Steelworkers Union that should result in cost savings for GT. In fact, GT officials said the contract could yield cumulative cost savings of up to $610 million during the three-year period and $300 million each year in ongoing savings. The contract covers workers at 12 domestic tire and product factories.

The union, roughly 14,000 workers strong, approved the contract, which allows for the closure of GT's Tyler, Texas plant (after a one-year transition period) and funds a $1 billion health-care plan for retirees.

The agreement effectively puts an end to a strike that began on October 5.

A representative for the union noted that "It took a strike, but we achieved a fair and equitable contract that protects quality health care for active and retired members ... and by winning major capital investment expenditures, it secures our jobs for the future."

Striking workers are expected to head back to work on Tuesday, beginning 2007 on the right foot.

GT comes into Friday's trading near a 4-1/2-year high. The shares have more than doubled since late July and recently overtook long-term resistance at their 80-month moving average.

Pessimism is still notable on GT; nearly 13 percent of the stock's float has been sold short, and the equity boasts a Schaeffer's put/call open interest ratio (SOIR) of 1.42, showing that puts easily outweigh calls in the combined January and February series.

The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROAW13M&PAGE=1.

About Schaeffer's Investment Research (www.SchaeffersResearch.com)

Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .

Source: Business Wire

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