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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 think it's: Dell is the U.S. leader in PC sales and IBM is the international/world leader.
TW
Television is dead. Long live That Weasel Television
Depends on how you define computer. IBM's the world's largest hardware company, and the world's second largest software company (both by revenue).
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.
In terms of shipped computers, perhaps. In terms of revenue and mkt cap, no. Not even close.
"Democracy is three wolves and a sheep voting on what to have for dinner."
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.
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.
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.
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
IBM is the leader in "computer" sales.
Remember, a lot of "computers" don't count as "personal computers". Still a lot of big and medium iron going out the doors of IBM.
....and the largest in services revenue I believe, which now represents an even bigger slice (44%) of IBM's revenue than hardware (33%) does.
Source: IBM 2002 Annual Report
JoAnn
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 !
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There are places where the networks are not touching,and there are places where they are-Boeing's Lori Gunter
I worked at a company in Eden Prairie, MN, that used to do that 'pump up the volume at month end' game to fiddle with their numbers. One weekend day I worked at triple-time pay taping up cardboard boxes for the Ink Division. A number of us from the PC Board troubleshooting area, the highest paid 'hourly' part of the company, worked that day. I thought it was ludicrious that they were paying me $45 an hour to tape up boxes, but I wasn't going to argue. I also wasn't going to stick around to make that company a long term career choice, of course.
Funny story from when I worked in a luggage store. We had to meet quotas on sales, or else my manager would get in trouble. One month, a bunch of us were short on our quotas right at closing time. We proceeded to buy the appropriate amount of luggage to put all of us over our quotas, then we drove to another store in the same chain that was 45 mins up the road (and closed an hour later) and returned the whole lot, getting our money back. They took the hit in their books, and all of our salesmen reached our quotas. Somehow, the whole chain went under last December, though...
Oracle is the 2nd largest independent software vendor by revenue. If IBM's software division was independent, it would be #2 and Oracle #3. Microsoft is largest in revenue either way.
I'm not trying to be redundant. But, I'd like to list IBM's main lines of business:
Hardware (PC's, mainframes, servers, etc.)
Software (Websphere, DB2, Lotus, etc.)
Services (stinkin' consultants)
Technology (basically microchips)
Financing (lending $ so firms can buy IBM stuff)
Research (more of a cost center than a profit center, but it is a huge part of the company).
As many folks have indicated in replying to the original note, largest depends on how you define computer company. I think the article-writer should have used the phrase "largest information technology company" instead.