Some good stats out today from at outifit named Lux Research on the bubble aborning in green-tech investing. (Bubbles aren’t necessarily a bad thing, by the way, as a new book by my pal Daniel Gross argues.) Lux counts 930 energy startups in the world today, and firm president Matthew Nordan says “there’s no way that more than a fraction … can possibly succeed.” I made similar bubbleicious observations recently in a Fortune column.

Some other nuggets:

* There were $2.04 billion in green venture capital investments in 2006, about half again as much as the total invested since 1995.

* Just a few investments from VCs (think: Khosla Ventures, Kleiner Perkins, VantagePoint, etc.) account for a disproportionate share of the investments: the top 10% of investments have soaked up 39% of the cumulative VC capital deployed.

* “Major print media” mentioned green investing 3,485 times in 2006, representing 70% increases for each of the last two years.

If you read carefully, you’re starting to see a bit of a backlash on all things green, and not necessarily only from the Al Gore-hating rightwing media. Kurt Andersen penned a savvy piece in New York recently called So We’re Green. Now What? Yesterday’s New York Times also ran a thoughtful article in the Week in Review section on the limitations of carbon offsets. It also used the wish-washy headline-writing technique (see above) of asking a question: Carbon-Neutral Is Hip, but is it Green? Brandweek reports that Honda (HMC), a clever marketer, is pulling back on its Environmentology advertising campaign.

The point here isn’t that environmentalism is a crock. Just that merely driving a Prius or planting a tree doesn’t all by itself help the environment that much. Neither does owning shares of First Solar (FSLR), because it is one of the few green-tech success stories so far, or General Electric (GE), because it’s investing heavily in wind power. (Some interesting tidbits on First Solar, by the way, in this article by the one and only Carol Loomis.) And with every bubble comes a backlash. Watch for it.

While most buyout funds are getting bigger, Silver Lake Partners, one of the first heavyweight firms to focus exclusively on technology, is broadening its horizons – by looking at smaller deals. Silver Lake manages nearly $6 billion in two funds, with signature deals like Seagate (STX), Nasdaq (NDAQ) and still closely held SunGard. Soon it will debut a mid-market fund, Silver Lake Sumeru, whose goal is to invest in companies typically too small for Silver Lake to consider. The fund will be headed by Ajay Shah, whose Shah Capital Partners is moving itself en masse into Silver Lake’s new and expansive Menlo Park, Calif., offices. The new fund aims to collect about $750 million, and bringing on Shah is a way for Silver Lake to go after different kinds of companies without distracting its exsisting big-game hunters. (Silver Lake took its name from a run at Deer Valley, Utah, where the original partners were skiing when they sealed their deal. As far as I can make out, Sumeru is a Hindu and Buddhist concept of a mountain in the center of the world. Mid-mountain. Get it?)

Silver Lake has been well documented in its relatively short existence. A guy named Serwer chronicled the firm’s founding in a 1999 article called “The Deal of the Next Century,” before Silver Lake started investing. I followed that with a piece in 2003, when Silver Lake decided to plunge back into buying tech. Don’t assume, by the way, that Silver Lake is ignoring the high end of the tech buyout market. On the contrary. It is busy raising its third fund, said to weigh in at $7.5 billion. That’s peanuts compared to the $20-billion fund Goldman Sachs (GS) just raised, but large for a tech-only operation. The Silver Lake boys are all hush-hush, by the way, about all of this. Not all of their investors are. The Indiana Public Employees’ Retirement fund, for example, recently announced its $50-million investment in Silver Lake Partners III.

Whenever I write about backdating, many people write in to tell me that backdating’s not illegal; you just have to account for it correctly.

Since so many people think this is an important point, I thought I’d do a post addressing just that contention.

It’s not really true. What I assume people mean is that granting in-the-money options is not illegal, so long as you account for it properly. That’s true. But the whole point of backdating is to pretend that you’re not granting in-the-money options when in fact you are. And to say it’s up to the bean-counters to catch this situation is silly, because the whole reason you’re using phony dates is so that the bean-counters won’t know what you really did.

And this is why defenses to backdating sometimes get hard for me to understand. Sure the accounting rules are arcane and most people don’t know them. But if someone asks you to write down a date from a month ago on a legal document, rather than today’s date, doesn’t it give you pause? If someone presents you with a spreadsheet of the last month’s stock prices and asks you to pick the date on which you want to pretend that you granted, or were granted, several million options, might that not at least spur further inquiry?

When then-general counsel Nancy Heinen emailed Apple (AAPL) CEO Steve Jobs such a spreadsheet on January 30, 2001, she noted that it was a bad idea to choose January 2 as the grant date–even though that was the day the stock had been at its lowest–if they wanted “to avoid any perception that the Board was acting in appropriately [sic] for insiders prior to Macworld announcements.” (They ultimately chose one of the next-best dates from after Macworld.) Now isn’t it obvious to everyone on that email that shareholders are being misled? She’s saying that shareholders will naively think that the options were really granted on January 2, leaving them suspicious of springloading. It goes without saying that they also won’t realize that, in reality, it’s all being done a month later.

Now the fair response in Jobs’s defense at this juncture would be to say: “Well, look, people just didn’t look at this stuff the way they do today, post-Sarbanes-Oxley, and so on. This was spitting on the sidewalk back then.” And I can understand that argument. My question is, if that’s your position, how can anybody be feigning shock that Nancy Heinen then went on to file all the false documents that would be required in order to carry out what everyone understood to be a spitting-on-the-sidewalk type infraction they were willing to commit. At a public company, it’s not just foreseeable that any deception upon shareholders will eventually have to be reduced to writing–it’s inevitable.

Last October I interviewed Scott McNealy, CEO of Sun Microsystems (SUNW), for a different story, and I brought up the subject of options backdating. I thought his comment was telling: “When I sign a document and it has a date thing there? Usually I write down the date when I sign it. I didn’t even go to law school, and I figured out that that’s probably the most appropriate thing.”

By the way, even in the unlikely event that someone backdates options and accounts for them properly–i.e., treats them as in-the-money options–he would still almost always be violating the terms of the stock option plan which has been approved by shareholders. Those plans almost always require that the options be granted at fair market value on the date of the grant. And if  there is a stock option plan that doesn’t contain that language, the backdater would still have to make disclosures in a half-dozen publicly filed documents about what he was doing. And what a weird disclosure it would be. Something like: “Please note that when we grant options, we sometimes pretend that we grant them on certain dates when in fact we grant them weeks later. Not to worry, though. We just do this to amuse ourselves, because we account for them properly using the real dates.”

Could the next person who writes in to remind me that backdating isn’t illegal do me a favor? Please name for me one company that has ever, in the history of corporate law, backdated stock options and yet properly disclosed and accounted for them.

Since Google (GOOG) announced its proposed $3.1 billion acquisition of DoubleClick earlier this month, Microsoft (MSFT) general counsel Brad Smith has been one of the most outspoken in urging antitrust regulators to closely scrutinize it. AT&T (T) has also publicly expressed concern, and the deal is also understood to be of great interest to Time Warner (TWX), (the parent company of Fortune’s publisher), Yahoo (YHOO), and nearly every big web publisher and advertising agency.

Obviously, the role of antitrust enforcement watchdog is a new one for Smith and for Microsoft, but such ironies won’t blunt the impact of any meritorious argument they might raise. I interviewed him last week about his perspectives on the deal. Below are excerpts. (I’ve edited my questions to make them sound more articulate than they really were. Also, I wasn’t taping, so Smith’s answers are just captured here as best I could using pen-and-paper notetaking.)

Q. For the time being, no one is asking outright that the deal be blocked. Instead, they’re just urging antitrust regulators to make a “second request.” [A second request for information indicates that the antitrust authority--either the Department of Justice or Federal Trade commission--has decided to initiate a full-bore, analysis that will probably take six to nine months to complete. The second request will come, if it comes, in mid-May.] Are people just being conservative?

A. Mostly, they’re probably being conservative. These questions are very novel. Before anybody tries to come to a conclusion, it would make sense to learn a lot more, in terms of having a data-driven analysis. It may well be, after learning more, we’ll be saying it should be blocked.

Q. I’ve heard people say that there’s no problem here, because Google and DoubleClick aren’t direct competitors. [Google's biggest business is in the market for paid-search ads, which are the text ads that show up alongside search results. According to eMarketer, Google held 75.6% of the U.S. paid-search market as of February 2007. Google also posts contextual ads on third-party sites, where the ad is targeted to relate to the content running near the ad space. DoubleClick, on the other hand, is the leader in providing Web services that advertisers and publishers use to post and manage display ads, including rich media and video. Compared to Google's contextual ads, these are typically higher-end ads, running on higher-end sites, touting higher-end brands.]

A. The law is opposed to two companies coming together if it’s going to acquire market power that would enable them to raise prices. So a big part of this question is, are they part of the same market and, if so, will they be in a position to raise prices?

Companies typically defend in a merger analysis by saying either, “No, we’re in two different markets,” or “Yes, we’re in the same market, but we don’t have a significant share of it.”

So the threshold question is: What is the market? To answer that you ask: Are two products substitutable for each other. If you raise the price on product A, will they shift to product B. If so, they’re substitutable, and are in the same market. I think [the argument that display ads, which DoubleClick brokers, and contextual ads, which Google handles, are in different markets] is very unlikely to sway regulators.

The thing that differentiates the two is the way they’re generated. A contextual ad scans the context of a page, and then chooses and serves up an ad related to that context. If it sees that the content is about Ford Motor earnings, it might serve an automobile ad.

With a display ad, they look at it through cookies generated when someone goes to other pages. You may be writing this article about Google, but the reader thirty minutes ago went to a Ford automobile page, so it might serve up an ad for a competing automobile.

Web sites rely on both. Are display ads and contextual ads substitutes for each other? They look the same, and they serve the same purpose.

Q. Do they look the same though? I thought contextual ads were typically much simpler than display ads.

A. Nothing in the technology requires that they be simpler. . . . Are they in the same market? It’s a very objective question. If the price of one goes up, will publishers switch to the other? We think the answer’s yes. If these two companies come together, they’ll have 85% of this market place. They’re the two principal competitors. One has the lion’s share of contextual; the other has the lion’s share of display.

Two other questions then need to be considered. How broadly should the market be defined. The narrowest would be by segment: display is one market, contextual is one market. At the other extreme, there’s [what Google CEO Eric Schmidt was reported as saying at the Web 2.0 Expo conference on April 17, which is that advertising is a trillion dollar business and that a post-acquisition Google would only have about one percent of it.] He wants to include all advertising on the planet. That would be the first time regulators have ever defined a trillion-dollar market, except maybe in the oil industry. Is a Web site publisher going to use newspaper ads [as a substitute for display ads]? I don’t see how that would work. [At the conference, eWeek.com also quoted Schmidt as having said: "This is an emergent business with lots of choices: customers have lots of choices, end users have choices and advertisers have choices. These are people [Microsoft and AT&T] who were involved in acquisition reviews as best I can tell and who lost.” -RP]

The last step, once you define the market and figure out the market shares, is you ask, what are the barriers to entry [by new competitors]? Even if the merged company has 85% of the market, if the barriers to entry are low, the regulators might say, we’re not going to worry [because new entrants to the market will prevent the merged company from raising prices to anticompetitive levels]. This is something the regulators need to study. This is a a market where there are very strong network effects with significant barriers to entry.

Q. What are the network effects here? ["Network effects" were famously a factor in the Justice Department's monopolization suit against Microsoft in the late 1990s. The argument there was that it would have been extremely difficult for a new competitor to enter the market for operating systems when so many thousands of existing applications had already been written to work only on Windows. Few people would want a new operating system, because few applications would exist to run on it.]

A. Everyone [gauges their success in this business] by measuring revenue per something. Revenues per ad impression. Revenues per search. Revenues per click-through. RP-something. What you see today is, Google’s revenue per search or revenue per ad are way higher than its competitors’. They’re double Yahoo’s, and even more compared to Microsoft’s. The reason? It’s how much personal information their sites collect and use. . . . It’s based on how much information you have on users. That’s attractive to advertisers. They keep aggregating [data on] all the searches you do, all the web sites you visit, and use all that data to serve up an ad. That generates more revenue per search. That makes it harder for other people to break into the market. Whereas in the 1990s, people focused on the applications barrier to entry, this is basically the privacy barrier to entry, or the advertising barrier to entry, or something. Within the next six months, I guarantee you a new term will emerge for how difficult it is to enter when you have somebody with economies of scale from owning so much of the personal information on the Internet.

If the kinds of factors I’ve described are real, what you’ll probably see with consolidation is the profitability of the company that serves the ad will continue to go up at the expense of the the Web site publishers on the one hand and the ad agencies on the other. The company in the middle will own all the personal information and derive all benefits. Talk to ad agencies, publishers, content creators. This is why they’re worried.

Well, readers? Do you find Smith’s arguments convincing?

Not far from the San Andreas Fault, a new fault line opened up in Silicon Valley yesterday — one that residents are actually thrilled to have discovered. We’ll call it the It’s All Nancy Heinen’s Fault. Heinen was Apple’s general counsel, and the SEC evidently believes she was the only one at Apple who engaged in any intentional wrongdoing in connection with that company’s repeated and blatant backdating. If only Heinen had also worked at Pixar.

In any event, we did get vivid new insight yesterday into exactly how the options backdating may have occurred at Apple (AAPL), as the SEC made public its civil complaint against Heinen and CFO Fred Anderson. (For the complaint, click here.) Anderson settled the less serious charges against himself and then filed an eye-opening press release of his own.  Heinen, through her lawyer, still denies the complaint’s allegations and Anderson neither confirmed nor denied its accusations against him. (Anderson was only accused of failing to notice what Heinen was doing and failing to take affirmative steps to put things right.)

Apple, the company, is now home free, though the status of its CEO, Steve Jobs, remains slightly clouded. The SEC praised Apple for its “swift, extensive, and extraordinary cooperation,” citing in particular its “prompt self-reporting, an independent internal investigation, the sharing of the results of that investigation with the government, and the implementation of new controls designed to prevent the recurrence of fraudulent conduct.”

The cloud over Jobs stems from the written statement released by Anderson’s lawyer yesterday, which says that Anderson explained to Jobs the accounting implications of backdating in January 2001, at the time Jobs was backdating a 4.8 million-share grant to the company’s executive team, and 11 months before Jobs himself was granted 7.5 million backdated options.

The Executive Team grant, which was nominally dated January 17, 2001, worked like this, according to the SEC complaint. On January 30 Heinen emailed CEO Jobs and CFO Anderson spreadsheets laying out Apple’s stock prices for every day in the month of January, and recommending possible dates on which to retroactively date the grant. In her email to Jobs she wrote, “To avoid any perception that the Board was acting in appropriately [sic] for insiders prior to Macworld announcements, I suggest we use Jan. 10, the day after your Macworld keynote, at $16.563. That was one of the lowest closes of the month, after the $14.875 price on Jan 2. I don’t think the [Executive Team] would object to the $1.688 difference to avoid claims of inappropriate conduct.”

The email seems grimly ironic, since she evidently fears leaving the misguided appearance that they were springloading — granting options just before favorable news — when in fact they were backdating, which is even more underhanded. (How Jobs processed all this, I leave to you.)

Ultimately they settle on January 17 (stock price $17.813), and the paperwork — unanimous written consent forms, or UWCs—are drawn up falsely reflecting that board action was taken on January 17. Heinen finally collects all the signed UWCs on February 7, when the stock price is $20.75.

It’s not explained what each board member was thinking when he signed the UWCs in early February, but I suppose some may have really believed that the grant decision had been made on January 17 (though it was supposed to be the board’s decision to make, since there was no compensation committee at the time), while others didn’t examine the UWCs closely, and still others didn’t know what difference any of it would make. Still, one of the board members was Jerome York—a former CFO of IBM and Chrysler—a point former CFO Anderson emphasized in his lawyer’s statement yesterday. (York was also later named to the three-person special committee that conducted Apple’s internal investigation of the backdating. He has previously said that he recused himself from looking at decisions he was personally involved in.  The others on the committee were former vice president Al Gore, who headed it, and Google (GOOG) CEO Eric Schmidt. Schmidt was formerly CEO of Novell, which has not yet completed its own internal inquiry into backdating that occurred there during Schmidt’s tenure.)

The conversation Anderson says he had with Jobs — in which he explained the accounting ramifications of choosing any date prior to when the board had actually given its approval — would have had to occur early in the process of awarding the grant, at a time when Jobs was planning to use the Jan. 2 date for the grant (the date Heinen thought would look too much like springloading). Anderson’s attorney says that Anderson “was told by Mr. Jobs that the Board had given its prior approval and the Board would verify it.” When asked about this account by the Wall Street Journal yesterday, Jobs referred the question to an Apple spokesperson, who declined comment.

Later that year, in August, the board decided to award Jobs a huge options grant, because a previously awarded 10-million share grant was now under water. By that time, Apple had set up a compensation committee, which consisted of York, Genentech (DNA) CEO Arthur Levinson, who chaired it, and Intuit (INTU) chairman William Campbell.

On August 29 the board decided (really, really decided) to issue Jobs’s options as of that date, when the price was 17.83. But subsequently Jobs became unhappy with the vesting schedule, and he and the compensation committee began haggling over that. (Technically, matters like vesting schedules are supposed to be settled already by the time the strike date is set, so this created an awkward situation.) The haggling went on for months, with the compensation committee holding meetings on October 16 and 19, and again on November 19 and 20. (Heinen, as corporate secretary, attended these meetings.) By mid-December, the complaint says, Heinen decided that the August 29 date would “no longer withstand scrutiny,” since, among other things, Apple’s fiscal year ended in late September, the relevant information had still not been supplied to auditors at KPMG, and the SEC filing deadline for reporting an August 29 grant had passed. So on December 17 she emailed the chair of the compensation committee, Levinson, with a spreadsheet of three months worth of stock prices and some recommended dates for backdating the grant. “There are several days in October and November, following the first meeting of the Compensation Committee . . . that are close to the Aug. 29th close of $17.83,” she wrote. “I suggest using a day that the Compensation Committee held a telephone call, either jointly or individually with the members.” I assume the SEC includes that detail because it believes Heinen made that suggestion so that the company could plausibly pretend that a board decision had already been reached on one of those dates.

On December 18, when Apple’s price was $21.01, the compensation committee and Jobs finally came to agreement on the vesting schedule, and the next day Levinson emailed the full board, cc-ing Heinen, explaining that the grant date would be October 19, when the price had been $18.30. (That corresponded to the date of one of the compensation committee calls.) Levinson wrote, “For the record, I informed Nancy [Heinen] in advance of our intentions and of the above specifics to be certain we were conforming to all legal requirements/guidelines.” This assurance, presumably, was sufficient to satisfy that SEC that all the other directors did not realize that anything improper was happening. (Levinson referred a request for comment to an Apple spokesman, who referred me to the SEC’s exoneration of Apple as a company, and its glowing endorsement of Apple’s cooperation in the its inquiry.)

In January 2002, Heinen allegedly had phony board minutes drawn up to reflect a “special meeting” on October 19, and saw to it that the August 29 board minutes (which had already been approved by the full board in November) were altered, with similar changes being made to the compensation committee minutes. (None of these alterations were cleared with the board, the SEC says.) Then she allegedly signed the phony minutes and an accompanying Corporate Secretary’s certificate, affixing the latter with the corporate seal and falsely attesting that the date was then November 2, 2001.

What do people think? Everyone happy with the It’s All Heinen’s Fault theory? Honestly, I don’t know anymore.
 

When Google (GOOG) announced its $3.1 billion proposed acquisition of DoubleClick on April 13, recovering monopolists Microsoft (MSFT) and AT&T (T) were the most vociferous complainants urging regulators to scrutinize the deal.

Alluding to the irony, I asked Microsoft general counsel Brad Smith last week if he’d be hiring David Boies, of Boies Schiller & Flexner, to counsel his company on the antitrust issues. It was Boies, of course, who had sliced and very nearly diced Microsoft seven years ago as lead trial attorney for the government in its monopolization case against Microsoft.

“Honestly, it hadn’t occurred to me,” Smith said, but he sounded intrigued, and asked me to have Boies call him if he seemed interested after I spoke to him.

Alas, I’ll be getting no referral fee. By the time I finally got through to Boies today, his partner Donald Flexner had already been retained by long-time client AT&T for the same purpose. Flexner could not immediately be reached for comment.

For now, regulators are doing their initial 30-day inquiry. In mid-May they will decide whether to make a “second request,” which is what would trigger a deep dive analysis that might last six to nine months. During that stage the regulators-who could be either at the Department of Justice or Federal Trade Commission-would typically seek information and submissions from interested parties, like AT&T. Finally, if the regulators ultimately approve the deal, private parties like AT&T have the right to file their own suits to try to block the merger, though you don’t see that tried very often.

What do you think of the No. 2 company on the Fortune 500 list this year? Should Exxon Mobil be in the top 5? Have you worked for the company, or bought its products? And does big mean better? Tell us what you think. The best replies will be published here, and possibly in a future story on CNNMoney.com.

What do you think of the No. 1 company on the Fortune 500 list this year? Should Wal-Mart be No. 1? Have you worked for the retailer, or shopped there? And does big mean better? Tell us what you think. The best replies will be published here, and possibly in a future story on CNNMoney.com.

What do you think of the Best big companies to work for? Have you worked for any of them? Do you prefer to work for a corporate giant or a small firm? Tell us what you think. The best replies will be published here, and possibly in a future story on CNNMoney.com.

What do you think of the companies on the Fortune 500 list this year? Have you worked for any of these companies, or bought their products or services? Tell us what you think. The best replies will be published here, and possibly in a future story on CNNMoney.com.