Business Highlights

SAN JOSE — Apple Computer Inc. CEO Steve Jobs apologized Wednesday for the company’s past stock-option practices after an internal investigation found accounting irregularities between 1997 and 2002 and showed Jobs was aware of some options backdating.

The iPod and Macintosh maker said its three-month investigation also prompted the resignation of former Chief Financial Officer Fred Anderson from the company’s board of directors.

The company said Jobs knew that some grants had been given favorable dates "in a few instances,” but he did not benefit from them and was not aware of the accounting implications.

"I apologize to Apple’s shareholders and employees for these problems, which happened on my watch,” Jobs said in a statement. "We will now work to resolve the remaining issues as quickly as possible and to put the proper remedial measures in place to ensure that this never happens again.”

Apple said it will likely have to restate some earnings as a result. The looming restatements threaten to wipe out some of the profit generated during the most prosperous stretch in Apple’s 30-year history as millions of consumers snapped up the company’s ubiquitous iPod. Apple has reported a total of $3.1 billion in profit over the past four years.

Shares of Apple shed 58 cents to $74.80 in aftermarket trading after closing up $1.30, or 1.8 percent, on the Nasdaq Stock Market on Wednesday.

Service sector expands more slowly in September

NEW YORK — The nation’s service sector expanded at its slowest pace in more than three years in September, reflecting managers’ fears about the economy, interest rates and security issues, a trade group said Wednesday.

Tempe, Ariz.-based Institute for Supply Management said its index of business activity for the service sector, which equals about two-thirds of the nation’s economic activity, registered 52.9 in September, well below August’s reading of 57 and lower than the 56 that analysts were expecting.

A reading of 50 or more indicates expansion, while below 50 shows contraction. The September figure represented the 42nd consecutive month of growth but is the lowest reading since April 2003, when the seasonally adjusted reading was 52.1.

While the business activity index is down 4.1 percentage points from last month, the two sub-indexes of new orders and employment were both up.

"Looking at those numbers, these lead me to believe that it’s not as negative as portrayed by looking at the business activity number.”

The service sector includes banking, construction, retailing and travel.

The prices paid index rose at a slower rate in September with a reading of 56.7 versus 72.4 in August. September was the 54th consecutive month prices increased, but the drop-off in the rate of growth signals inflationary pressure may be easing, which could be a sign to the Federal Reserve that it has done enough to curb inflation.

The new orders index registered 57.2 while employment was at 53.6, with both growing more quickly than in August.

The 10 industries that reported growth were mining; retail trade; educational services; health care & social assistance; utilities; wholesale trade; public administration; professional, scientific & technical services; finance & insurance; and management of companies & support services.

Six reported a decline: transportation & warehousing; other services; real estate, rental & leasing; construction; arts, entertainment & recreation; and accommodation & food services. Two industries reported no change. They were agriculture, forestry, fishing & hunting; and information.

The backlog of orders, which had been contracting in August, began growing in September, which managers attributed to a seasonal change. The backlog reading was 53 over 49.5 last month.

Export orders grew faster in September, with a reading of 59, compared to 53 in August, while imports grew more slowly at 55 compared to 60 last month.<