By Richard Koman for SiliconValleyWatcher.com

After Apple announced they would restate all their earnings post-2002, the stock naturally fell but not as much as one might have suspected. Conventional wisdom was that investors were holding out hope that the restatements wouldn't be all that serious. Forget it.

In its 10-Q filed today (PDF), Apple stated:

The company anticipates that there will be significant changes in the results of operation for the quarter ended July 1, 2006, compared to the quarter ended June 25, 2005, including significant increases in the Company's revenue and expenses. The Company cannot provide a reasonable estimate of the results because it will likely need to restate its historical financial statments to record non-cash charges for compensation expense related to past stock option grants.

The AP's Michael Liedtke notes that the "irregularities" in the stock options date to 1997 — the same time that Steve Jobs began running the company (again).

Apple has acknowledged its stock option inquiry involves some awards made to Jobs, although the grants were canceled before its chief executive realized any gains.

Some investors nevertheless worry the brewing scandal might distract or, in a worst case scenario, force out Jobs, who is widely viewed as the key to Apple's continuing success. Industry analysts so far seem to believe he will remain on the job and focused on building upon Apple's recent momentum.

More charges against Reyes

p>More trouble for ex-Brocade execs Greg Reyes and Stephanie Jensen. Much more trouble. A day after a judge refused to throw out the backdating charges against them (while acknowledging the charges "could and perhaps should have been more specific"), a federal grand jury returned eight additional counts against the pair, including securities fraud, falsifying records, mail fraud and filing false financial statements that overstated the company's profits, the Mercury reports.

Reyes was also indicted on four additional counts of making false statements to Brocade's auditors, who had probed whether the company routinely rigged prices on stock options to secretly give new employees a head start to potential profits.

Meanwhile Brocade executives including former board member and legal adviser Larry Sonsini agreed to settle a shareholder lawsuit. Auditor KPMG was part of the settlement too.

Under the deal, Brocade's board of directors will appoint either a lead outside director or an independent chairperson, and the company's general counsel will serve as chief compliance officer. Brocade also will pay $525,000 to lawyers representing investors. A settlement hearing is scheduled for Aug. 18.