Slashdot Mirror
IBM Says SEC Probing Its Accounting
chriscooper1470 writes "International Business Machines Corp. on Monday said that the U.S. Securities and Exchange Commission had begun a formal investigation of how the world's largest computer company accounted for some revenue in 2000 and 2001."
I thought Dell was the World's Largest Computer Company...?
"It's better to have a gun and not need it than need a gun and not have it." ~ Christian Slater, True Romance
IBM and Martha Stewart were in cahoots.
"Yes, thank you very much. The news is just starting to hit. Yes, it looks good so far. Well, it will take some work, but they'll look to settle the case after they lose about 80% of their market capitalization. Expect the usual donation, and good luck with the finding WMD thing."
Well, the bigger they are the bigger they fall, unless they are so big that they fall upon themselves and recieve a cushioning effect.
Insert Witty Remark Here ===>____________________________
The long, icy reach of SCO.... curses!
Oh wait? There is no conspiracy? Darn.
This space for rent.
SAN FRANCISCO (Reuters) - International Business Machines Corp. on Monday said that the U.S. Securities and Exchange Commission had begun a formal investigation of how the world's largest computer company accounted for some revenue in 2000 and 2001.
Armonk, New York-based IBM said in a statement that it "believes the investigation arose from a separate SEC investigation of a customer of IBM's Retail Store Solutions unit," which sells electronic cash registers and other point-of-sale products.
IBM shares fell almost 3 percent on electronic trading network Instinet after the announcement, which raised the specter of the accounting scandals of Enron, WorldCom and others that have undermined investor confidence.
"This is big news because it goes back to the old accounting scandals that have shaken investor confidence, starting with Enron," said Burton Schlichter, senior market analyst with Lind-Waldock & Co., a division of Refco LLC.
The Retail Solutions unit is part of IBM's personal systems division, and IBM does not break out revenue for that unit, said spokesman Bill Hughes.
"The SEC is seeking information relating to revenue recognition in 2000 and 2001 primarily concerning certain customer transactions," Hughes said.
Hughes said he would not name the customer.
The SEC advised the company that it has not reached any conclusions related to this matter, IBM said, adding that it is cooperating with the federal agency.
"IBM believes that its business and accounting policies comply with all applicable regulations," the company said.
A spokesman for the SEC declined to comment on the matter.
"This might prove to be a nonissue and their claims to credibility might be intact, but it's out there, and it's an overhang," said Marty Shagrin, analyst at Victory Capital in Cleveland, Ohio, which owns IBM shares.
IBM's accounting has come under scrutiny over the years, with investors criticizing the company for its lack of disclosure. Last year, IBM addressed some of those issues by increasing the amount of information that it provided.
But some investors have continued to say that the company has not abandoned the earnings management habits that enabled it to produce quarter after quarter of steady earnings growth under former Chief Executive Louis Gerstner through such methods as share buybacks.
James Grant, publisher of Grant's Interest Rate Observer and a longtime critic of Big Blue, said he had not pored over IBM's books recently but found IBM's accounting aggressive when he started focusing on the company in the late 1990s.
"We found it aggressive and promotional and questionable and I think it's appropriate that the SEC should be looking into it," said Grant.
In April of 2002, the SEC disclosed that it had opened and closed a preliminary inquiry into IBM, but it did not specify the focus of the investigation.
Shares of IBM were halted by the New York Stock Exchange on Monday afternoon. In the regular session, the shares fell 62 cents to $87.42, not far off its 52-week high of $90.32.
On Instinet, IBM shares fell to $85.
Simple...they made it by stealing IP from SCO! Case closed!
Contrary to my usual function, I'll actually try to avert a flame war here by bringing some pragmatism to /.
Before the leftist cries for massive oversight and regulation start spewing forth from the electronic abyss, let me remind you all, dear readers, that regulation is only going to make a bigger mess - look at Health Care. The regulatory code becomes the type of swiss cheese policy that only tends to lead to more violations, more investigations, and more spurious litigation all around. (That's a separate rant, as I work in the industry - I will elaborate if my case must be made that the Health Care financial situation is a mess, but I think most people realize that as fact.)
But no, you say, deregulation will give those heartless plutocrats the freedom to stomp all over us! Absolutely. What do we do? The hell if I know - but it seems clear to me that the answer lies in trying to simplify what is a corrupt, bloated mess.
Ooops, VA Linux is being investigated for creating accounting...
In other words, IBM is known to play by the rules and treat investors fairly. If they were ever guilty of anything, it would be that about 6 years ago they didn't disclose as much information as they should have to investors. That's much different now.
It looks like the issue was did they put the revenue in the right quarter. Since they are not talking about 2002 or 2003, it means that the contracts in questions were fully realized. So it was just shifting stuff from one quarter into another not wholesale fake revenue like Enron. On big long drawn out contracts it is real tough to tell where to put the revenue and expenses. This is just a non-issue and its not really a tech issue.
Even if they are a little "aggressive" with their accounting I highly doubt they'll be in the type of trouble Enron is in. I don't think IBM is going away anytime soon, and they (the SEC) are just investigating the accounting for 1 division relating to 1 customer. I don't think there's much to worry about (famous last words?)
There are only 10 kinds of people in this world... those who understand binary and those who don't
I highly doubt this is anything like Enron/Worldcom/Adelphia. Companies, especially tech oriented companies got scrutinized pretty well after those big guns fell. I'm hedging my bet on there were some small discrepencies, but nothing larger than 100 million. Sure, that's a lot of money, but not as much as the Billion our buddies at SCO want.
On a personal note, i haven't heard of rampant, silly hiring by IBM. I was told by a Worldcom employee in the summer of '01 that they'd hire any EE they could get their hands on. Wow, i though, they must be booming to be hiring like that. Obviously not, but i haven't heard of any strange business happenings from IBM.
Too bad my co-op here hasn't used those accounting methods... they're kinda hurting right now. And a couple years of faked prosperity would be a good learning experience :P
IBM's market share reaches far wider than Dell's. First off, IBM is heavy in the mainframe market, as opposed to Dell which only sells intel-based servers. Secondly, IBM also has a large non-US marketshare, of which Dell only recently broke into.
Just because Dell sells more PC, that doesn't make them the largest "computer" company.
We all knew it was bound to happen. I mean, really folks. The problem with accounting is endemic. You don't get big and profitable and powerful without playing all the games the same as everyone else.
In related news, isn't Martha Stewart getting charged soon? To quote Robin Williams, she's going to become someone's b*tch.
-- "We are all in the gutter, but some of us are looking at the stars" [Oscar Wilde]
Apart from causing fluctuations in IBM shares temporarily, I don't see how this will have any long term impact on IBM. :-)
Surely this has happened before. Many big business use as the article describes "aggressive accounting" for promoting confidence in investors. If you are an investor you better be aware of this.
Unless there are wide gaps in balance sheets of 2000 and 2001, which would mean a enron , worldcom like scenario, there is not much to worry about, i guess
But then I don't own any IBM shares either
for the last time people, I am "frodo from middle eaRTH", not "middle eaST".
I used to work for IBM. We were always cooking the books. We also did a lot of scheming about licensing for mainframes.
I thought that it had stopped after I left there but apparently it's still going on. Those knuckleheads will never learn.
Now, I hold down a job with Anderson Consulting.
I am evil and you can't catch me. I am going to go now and figure out a way to outsource your job... You nerdbot dissaffected geek losers.
... man beginnt mit Untersuchungen. Das ist noch lange kein Beweis von irgendwelchen Unregelmäßigkeiten. Da kann von Pleitegeier noch lange keine Rede sein.
Micro$oft ist nicht die Antwort. Micro$oft ist die Frage. Und die Antwort ist NEIN.
ibm knows better than to practice in questionable dealings. the company is very old and has a reputation of integrity, honesty, quality. with that said, it is sad that these articles have such a negative effect on the share price. i happen to own a number of shares and i just hope it's only a matter of time before ibm is cleared up and the price goes back up to where it was because the company is undervalued today as is.
just my 2 cents.
hahaha. NO.
Sorry, no, this is a poor attempt at humor.
Go back to your unfunny cave. Thanks for trying.
Ted: That money was resting in my account.
Dougal: Right. A good long rest.
Regulation of such large and complex industries under our political system simply does not, and will not work. Typically, tight regulations hamstring businesses, which then (via litigation and lobbying) slowly poke holes in them until they can hatch from their evil alien dinosaur eggs.
If we don't give in to these interests, we're seen as statists. If we do, our regulatory code degrades at great cost to the taxpayers.
funny stuff!
As I was reading your post I Imagined it as a Get your war ON! comic
But the only flaw with your scenario is that the WMD-searcher needs the economy to get better, this IBM thing is slamming the DOW, which in turn hurts the economy and investor confidence
Sehr geehrter Toilettenbenutzer!
Well you see... they've been selling free software, so how could they possible have any revenue from it?
I bet if we look at their spending, there will be free software in there. No company would be dumb enough to sell free software, so that must be an accounting irregularity too!
Damn, and all my capital is tied up in bonds.
By the time I can convert into IBM stock this will probably ahve blown over.
Damn.
"Live Free or Die." Don't like it? Then keep out of the USA
As a search on Google shows an SEC probe has happened to a lot tech. of companies.
Other than the Fact that IBM is a major player in the SCO story, does this deserve a mention on the slashdot frontpage? Is this in any way an effort to slashdot the IBM share prices? Why does the submission come from somebody who has never earlier posted on slashdot
Did Iraq have WMD?
.ACMD setaloiv siht gnidaeR
The inquiry is related only to some possible inconsistencies related to IBM's point of sale (POS) unit, which is only responsible for around US $300 million of revenue. The SEC has not revealed anything about the inquiry, but IBM has said that it stems from an earlier inquiry related to this business unit. More details here. Either way, anyone that is shouting "Enron!" at this is either foolish, uninformed, or possibly both.
IBM also stated that the reason for the review is because the SEC is reviewing one of IBM's customers in its Retail division that sells cash registers. No biggie.
...
Slashdot likes IBM, so this doesn't matter. The majority of the first 50 posts are saying this isn't a big deal.
/. and it really doesn't matter, but how can you guys expect anyone to take you serious. /. as a whole is so influenced by its various prejudices that most of the comments are reduced to meaning nothing.
/. community puts out.
If all the news was the same, but IBM was replaced with MS, they first 50 posts would have been so very different.
I know this is just
Is this the face of OSS? You guys criticize corporations for all their spin, but let me tell you, many a corporate PR department pales in comparison to the spinning and slanting the
Big Red?
Ouchh.
... one begins with surveyings. It is not always to along some test of some irregularity. Here to along no speech it can be still of the vulture of breakdown.
Does anyone have more pointers to this Grant, and knows if he has information on IBM comparable to what Bill Parish has on Microsoft?
Leandro Guimarães Faria Corcete DUTRA
DA, DBA, SysAdmin, Data Modeller
GNU Project, Debian GNU/Lin
And IBM makes cutting-edge chips...and IBM is heavily involved in "blue sky" R&D for stuff like carbon nanotube transistors...and IBM sells services and consulting...and IBM develops OS's (ties in to your mainframe point).
IBM and Dell really aren't in the same league. IBM invents things. Dell assembles them.
-Looking for a job as a materials chemist or multivariat
Mis-takes? More like opportunity-stakes!
Anyone get the reference? Anyone?
"how the world's largest computer company accounted for some revenue in 2000 and 2001." ...when companies of have to account for having
some revenue.
IBM "big blue" has recently checked its books and made note that it has in fact been hording all the money from the code that they stole from SCO and then gave to the massive company called Linux (tm). Linux is an "open source" project that has been under the guise of a "free community" for over 10 years now and recently was discovered that it was nothing more than big brother himself.
"We're in the business of taking other peoples code and giving it away to third parties in lew of violating contracs." Said Bill Lumberg CEO of IBM, "If it wasn't for us we wouldn't be able to screw over the little guys around every turn."
IBM is expected to filter the money in $4,999 transactions to off shore accounts in the carribean to offset what seems to be an "error" in the books. "We apologize we didn't see this earlier and we're going to catch the people who didn't cover this up correctly," said Lumberg.
SD
Ignore the "p2p is theft" trolls, they're just uninformed
Accounting rules are so complicated, it's hard NOT to violate them at some point: even if you're the most honest person in the world. Especially, in an organization as large as IBM. Any one of their divisions could be on the Fortune 500 by itself.
It's the same with Federal Taxes. You can have all your ducks in a row and the IRS will STILL find something wrong with your taxes. I know of someone who accidently OVERPAID his taxes. The IRS FINED him for over paying!
There is no spoon or sig.
- ???
- Get investigated by SEC
- Profit!
or:- Profit!
- ???
- Get investigated by SEC
Any insight?http://www.ftc.gov/bcp/conline/edcams/donotcall/in dex.html
Is it just me, or is that "It's Coming Soon" lady kind of scary. She's got, like, spikes coming out of her head. And what looks like a tenticle next to her face... Maybe the $11,000 fine is just for first offenders and they sic her on them next...
Fine with me...
The Christian ideal has not been tried and found wanting; it has been found difficult and left untried. -G.K. Chesterton
Microsoft has already agreed to pay Enron for a license to use these same accounting practices.
philcrissman.com.
Since when did IBM turn into an M$ reseller?
My first real programming job, one of my first assignments was figuring out how come the quarterly sales figures didn't jibe with the monthlies and the yearlies didn't jibe with the quarterlies (sum of monthly numbers > quarter, sum of quarters > year).
Finally realized (looking at the audit tables generated by a sql trigger) that the VICE PRESIDENT OF SALES was entering a bunch of sales at the end of the month, "booking" them for the monthly report run, the "unbooking" them after the run, and eventually cancelling them. The cancels were eventually picked up on the next month's report, but the system didn't back-adjust and rerun the old month report.
This made the VP look great, although he had to get nervous because every month he had to book enough fake orders to cancel last months back charge, plus the amount he wanted to pad this month (for some asinine reason, the cancels didn't carry forward from month to month, only the previous month). BUT, the quarterly reran ALL the numbers again (it didn't just total the months), so the numbers didn't fit. Anyway, he got nice monthly bonuses.
Anyway, I had to go to my boss and show him the stuff. I was real nervous, I'd been in this position about two months and was presenting evidence of the VP engaging in fraud. The funny part? Nothing happened to him. Nothing at all (although we fixed the system). My boss said he was told it couldn't be "proven" to be him and he claimed he didn't do it. He said 'several people have my login" (smart, real smart!). Anyway, the rich get richer. I always' wondered if his bonuses got docked?
DO NOT DISTURB THE SE
We used to buy computers from Datapoint in the late 70s and early 80s. Funny thing was, they'd send us extra equipment once in a while, when we'd ask, they'd say, oh, shipping error, send it back.
They also had a track record of zillions of quarters in a row of ever increasing revenue.
One day, some rookie accountant wondered why so mnay Holiday Inn rooms were being booked and no one was staying in them, investigated, and found they were ful of extra equipment, being shipped at end of quarter to show increased revenue. Huge scandal when that hit the news, stock dropped by a factor of ten overnight.
At least that's my memory of such long ago events, and I'm not even going to stick to it if someone has a better memory.
Infuriate left and right
While your equation is true remember that:
Communism = (~innovation)&&(~democracy)&&(~freedom )
Your pizza just the way you ought to have it.
Welcome to Da Dip.
Still kicking yourselves for not investing at ca. $55.00 a share? Redeem yourself.
Buy IBM now, mah peepz...
Communism = (~innovation)&&(~democracy)&&(~freedom )
If, from the parent's parent post Capitalism != (innovation|democracy|freedom)
then if Capitalism is True (i.e. exists) it means (innovation|democracy|freedom) *HAS* to be false, and therefore, in Capitalism, there cannot be innovation, nor democracy, nor freedom.
Therefore, gentlemen, you have just concluded Capitalism == Communism.
One of us must be wrong.
"This is big news because it goes back to the old accounting scandals that have shaken investor confidence, starting with Enron," said Burton Schlichter, senior market analyst with Lind-Waldock & Co., a division of Refco LLC.
That isn't a fair statement. The SEC's issue with IBM is qualitatively different.
Enron created a number of derivative exchanges for gas distribution and pretended they were balanced and immune. This would have been fine if they just ran the boards like the NYSE. But Enron failed to remain neutral and took positions. If anyone's bought on margin or bought a derivative, you know (I hope) that you could lose way more than you've invested. There are two reasons to buy derivatives: to hedge or to speculate. Hedging decreases total risk, for a cost. Speculation increases potential reward, but also can greatly increases risk.
I don't think IBM is operating a secret dervative trading board.
Worldcom spent large amounts in start-up costs building physical networks and did not report these expenditures as current period expenses. Instead they deferred these to future peiods where they hoped they'd make money on the new grids. You're only allowed to defer reporting costs if there's a very good chance of paying them later. It's the principle of matching expenses to work/revenue. When the telecom bubble burst recognition dawned that all these expenses could not be matched with probable revenue.
IBM hasn't been creating huge new infrastructures at vast expenses. The SEC specifically mentioned revenue.
The other bad thing Enron and Worldcom did was to grant stock options to their executives and not show as an expense the increasing value of these. Again this is an underreporting of expense issue.
It sounds like a scare tactic to influence IBM's share price and drum up some trading fees.
Esteem isn't a zero sum game
IBM might well be the hand holder of OpenSource freedom these days but the company is bigger and darker than it's Linux initiative.
IBM Global Services started life as The Third Reich's data center when they [literally] muscled in to the punch card market, dominated it, and then leased the Nazi's the machines and sold them billions of punch cards to process everything from the railroads to the work rota's of the death camps.
Did you not ever wonder how the SS identified & catalogued millions of people. It certainly wasn't with pen & paper.
In 1937 IBM founder Thomas Watson was even given Germany's highest honour for a non-German, "The Cross of the German Eagle". It was not until 1940, while the bombs where dropping on Europe, that he reluctantly returned it.
They even managed to get their equipment back from the camps when they were liberated !
The path to redemption is public revelation
You cannot be forgiven, until you say sorry.
http://www.edwinblack.com
There are places where the networks are not touching,and there are places where they are-Boeing's Lori Gunter
North Korea is last because we know they actually HAVE WMD and might be inclined to use them. And that's frustrating and extremely off-message. What were they thinking?
Reset and try again please.
Let me guess. You don't have a girlfriend.
A date? Ever been on a date?
I think past experience and my big pile of quarters show I'm right.
actually the SEC is investigating a customer of IBM and double-check their information with IBM. Nothing to worry about (hopefully)
Wiktor
its because IBM dares to mess with MS, gates must be pissed. 1st SCO--who probably has an under-the-table deal with Gates to hurt linux.
Now IBM is getting it from the feds....That pimp gates now has that whore in the whitehouse after them!
In communism, man exploits man. In capitalism, it's the other way around.
MORTAR COMBAT!
Well, that's obvious - they started selling SCO ...
code
Oh, wait - revenue.
I like IBM's stand on linux just as much as the next guy, but i read a cool book by Andres Openheimer (Andy is his CNN corresponsal nickname so you wasps can trust him, he is argentinian in origin).
He wrote a book, i dont know if he wrote it in english too, called Ojos Vendados (Veiled eyes or something), where he detailed a couple of the largest scams ever made in the history of latin america and how IBM was all in it.
The scam was a project to provission all of the tecnology of the arentinian national bank, this was a billion dollar project!
What arentinian authorities discovered was that ibm bribed a couple of hundred top level employees of the bank, the project's cost was 600 million dollars real cost, a similar sum just in bribes.
So, no business is a moral entity, distrust any moral entity/organization that calls itself so (especially your church), keep things in perspective, uncle bush is friends with uncle gates, so not even the auditors can be trusted.
Lex
NO SIG
It sounds to me like this might not even be an investigation of IBM per se, but an investigation as to how a particular customer arranged payment for their orders. Maybe Enron or some such convinced IBM to take a stock swap for orders or some other trade intended to boost the customer's expenses without draining their cash reserve.
The comments by James Grant seem irrelevant, as there is no indication of exactly what is being investigated.
Maybe there is an accounting error somewhere at IBM, but it seems to me it's an investigation of a very specific set of transactions, not an investigation of overall practices ala Enron.
I do not fail; I succeed at finding out what does not work.
When I saw this story, I thought of all IBM's great contributions to computing on up through the 1980s. Now, looking back at that legacy, it's almost a little bit sad -- I mean, I got my big break thanks to IBM -- but not really too sad. I mean, IBM is finally meeting the well deserved fate of other frightening companies that you should never, EVER, buy things from, such as Sun, err I mean Enron, and WorldCom. I guess some companies just can't stand on the performance of their own products -- some wither, and others, like IBM, decide to bury their head in the sand refusing realize they aren't, won't be, and can't be the future of computing, only then to go out with a bang of accounting fraud! Of course, I hope you haven't acquired any goods or services from this terrifyingly scandalous and disreptutable corporation, but if you have, now that the end game is near, and the SEC is eviscerating IBM and its record breaking accounting fraud, have you thought of where you will turn to for your...
(interrupts) Um... Your Grand Highness,
Damn!!
False alarm! False Alarm! Everyone back to Redmond...!
They can't really blame it on a computer error, can they?
Dell = Fry : Delivery Boy
But IBM = Dr. Farnsworth : 100 Year old Nobel Prize winning(seeking?) mad scientist
"I'm about to drop the hammer and dispense some indiscriminate justice!"
Are you reasonably suggesting that the Linux world would collapse if IBM killed it's Linux legion?
There are places where the networks are not touching,and there are places where they are-Boeing's Lori Gunter
Sales Guy: Here it is...
IBM Mgr: What is it?
Sales Guy: It's a machine to solve all your accouting problems.
IBM Mgr: We need one of these! How can I get one?
Sales Guy: Contact IBM
IBM Mgr: uh........
For all your computing needs, contact IBM.
Somewhere, there has to be many former Enron and Worldcom execs preparing a welcome to the club party for Sam Palmisano. (IBM CEO)
There was plenty of evidence of nazi atrocities and not nice behavior available to the press before the man of the year fiasco/embarassment. Also what they intended, I mean, let's get real here, the words are there in posterity. Same as there was in the previous Olympics in germany. How much more of a clue of "aryan master race" and whatnot does it take to make a point. You see, MANY top leaders in the western countries outside germany LIKED them and still like now the concept of massive structured command and control type governments, and they don't care if they are so called left wing,right wing, or whatever. Those sorts of schims are carefully constructed to keep the most of folks who wind up being commanded and controlled at odds with each other, instead of turning their notice to the ones actually spewing for the commands. It's an old dodge, but it works so well the ruler types keep using it. It's the concept of an "elite" ruling class that gives orders, something that THEY belong to when you are talking about very large media concerns. It perpetuates to this day. The media in particular has always been as rigorously controlled as they can get away with. They CHOSE to not speak the truth about the nazis early on, because they supported those sorts of viewpoints, in particular then, some were really nazis at heart, others just wanted a nice big fat juicy war, lots of profits to be made in war. The two main purposes of the really big old media houses are to make money, and to perpetuate propaganda for political agendas, which gets around back to making money and getting more control and power. They are equal endeavors. EQUAL. People always deny the propaganda part (mostly anyway, I am really generally speaking in all this of course), when all you have to do is look back and see what was said, and when, then contrast it with what comes out later. They have been 100% consistent in being exposed as liars and manipulators, yet, people still believe them because they never got called on it, they are allowed to continue, year after decade after generation, and they hide behind a corporate front man, and use the excuse of "we must protect the stockholders" and whatnot. These global billionaires who actuall own this big media thing ALSO have a lot of other "stock" in this or that and are on on other "boards". They PROTECT that.
Top levels of government, being composed of these same exact global corporatists, all benefit from this, because they are part of the command structure, no matter which "party" they belong to,again,part of a front effort. Executive, legislative,and judicial, with hardly an exception to the rule. It perpetuates. Some small examples, thee are thousands, these are just a few at random. Just recently this year some judge "ruled"-notice that term 'ruled'?- that news organizations have no law that requires them to report the truth, even when they have access to the truth. The case was FOX news versus one of their contract reporters/employees, a developed story on bovine growth hormone in milk. Oh, another biggee, when the Liberty was bombed and strafed by the Israelis. That story, even though completely known about in government and top levels of media, was just ignored, because it didn't fit some political agenda of the time. it took years and years to come out, way past the time that a timely realease would have altered public opinion differently. The gulf of tonkin "attack", now some person like mc namara can admit it was a lie, but back then, it was reported as "the truth". Many people knew it was a lie at the time, yet the lie was pushed forward,because it fit an agenda.
Back to the nazis. My own uncle, now passed on, was an immigrant from germany before that Time cover deal. To be more fair, he would have stayed in germany, he considered himself a political ex patriate, he vamoosed because it was obvious to anyone there that germany had become quite the obnoxious place to be at, and that it was getting worse pretty fast, so he split. Anmd it wasn't because he was a target per se, h
Bingo!! Wank word bingo