Reuters Reports On Jobs Stock Options: US$548 Million Or US$1.4 Billion?

Remember those stock options granted to Apple CEO Steve Jobs in 1999? Reuters does. Appleis Board of Directors made quite the stink when they gave Mr. Jobs a staggering 20 million options (split adjusted) on Apple stock. They also gave him a Gulfstream V (known as a G-V, not to be mistaken for a G4 or a G-IV. Check out our comparison between the two for those who may still be confused. :-) executive jet worth a cool US$90 million too, which also raised eyebrows. At the time, Appleis stock was trading in the US$40-US$50 range (split adjusted), and the options were priced at US$43.59 (approximately, and split adjusted). It seemed like an extravagant reward to some observers, but since that time, Appleis stock price has plummeted like the Hindenberg in a lightning storm, and Mr. Jobs now has a while to wait before he can cash in. For the record, his performance as CEO of Apple has certainly warranted such a compensation package, especially considering the length of time for the vesting cycle, some 10 years. Besides, he only gets US$1 (one dollar) per year in cash compensation.

That brings us back to the Reuters article. Reuters was reporting on how much those options would be worth once they were fully vested, assuming an average of a 5%-10% growth of the stock price per year. We arenit sure about their math, but it is interesting to see Mr. Jobsi compensation still making news more than a year later. Our calculations show that it would cost Mr. Jobs US$837 million to exercise those options, meaning that until Appleis stock price tops the 43.59 mark, he would lose money by exercising those options. According to that Reuters piece:

Steve Jobs earned a bare $1 salary working as chief executive for Apple Computer Inc. last year, like the year before, and the year before.

But a $90 million plane in December 1999 and options potentially worth $548 million to $1.4 billion a month later may have helped to ease the pain of two and a half years of starvation wages for the man who gave new life to the iconic home of the Macintosh (news - web sites) computer.

However, the stock price will have to go up first.

Jobs returned three years ago to the company he founded and is credited with turning it around. He also was the guiding hand as the company hit the skids, missing lowered expectations in the fourth fiscal quarter of 2000 and losing money in the fiscal first quarter of 2001.

The board of directors gave Jobs a jet worth $90 million in December 1999. After he agreed to become chief executive, after two years as the interim head, Apple gave him 20 million options in January, 2000, the company said in a filing for its fiscal 2000 year.

Those options, which mature in January 2010 at the price of the stock in January 2000, $43.59 per share, will be worth $548 million to $1.39 billion when they expire, assuming Apple stock gains five to 10 percent annually from that base, the company said in a report to shareholders.

But Apple shares have a long way to go, having closed at $18-5/8, off 8 percent, on Nasdaq on Monday

The article goes on to contrast Mr. Jobsi compensation to that of IBMis CEO.