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."

Comments

Dell?

[Matrix272]

I thought Dell was the World's Largest Computer Company...?

Re:Dell?

[ThatWeasel]

I think it's: Dell is the U.S. leader in PC sales and IBM is the international/world leader.

Re:Dell?

[sporty]

Depends on how you define "big". IBM may make more money on corperate stuff. Dell makes most in home sales.

Re:Dell?

[Xrikcus]

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).

Re:Dell?

[DrTentacle]

They've obviously heard about IBM buying out SCO any time now...that's sure to make them the biggest...

Re:Dell?

[p0ppe]

In terms of shipped computers, perhaps. In terms of revenue and mkt cap, no. Not even close.

Re:Dell?

[TopShelf]

Dell makes plenty of $$$ on the corporate side, but still sticks to hardware. IBM, on the other hand, has a software division and IBM Global Services, which I believe is the biggest IS consulting outfit in the world. They've really turned things around from 10 years ago, when they were heading towards extinction...

Re:Dell?

[Anonymous Coward]

yes, Dell is the largest computer company, if you are talking about little useless toy computers. IBM makes these toys too but also much much more.

Re:Dell?

[doinky]

Dell is the leader in "personal computer" sales, at least in the US.

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.

Re:Dell?

[technomom]

....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

Re:Dell?

[wo1verin3]

>> IBM designes and makes computers

I worked for IBM... I'm not sure if that statement is entirely accurate.

Re:Dell?

[p0rnking]

"... and the world's second largest software company (both by revenue)."

Then how come I keep seeing that Oracle is the 2nd largest Software company (which I can't see either)? What is that based on, since I doubt it's by # of software sold.

Re:Dell?

[sd_jeff]

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.

Re:Dell?

[jhylkema]

No, must resist, can't, ngahhhh . . .

WHY DID THE CHICKEN CROSS THE ROAD?

IBM Global Services (or insert your favorite consultantcy name here) consultant: Deregulation of the chicken's side of the road was threatening its dominant market position. The chicken was faced with significant challenges to create and develop the competencies required for the newly competitive market. IBM Global Services, in a partnering relationship with the client, helped the chicken by rethinking its physical distribution strategy and implementation processes. Using the Poultry Integration Model (PIM), IBM helped the chicken use its skills, methodologies, knowledge, capital, and experiences to align the chicken's people, processes and technology in support of its overall strategy within a Program Management framework. IBM convened a diverse cross-spectrum of road analysts and best chickens along with IBM consultants with deep skills in the transportation industry to engage in a two-day itinerary of meetings in order to leverage their personal knowledge capital, both tacit and explicit, and to enable them to synergize with each other in order to achieve the implicit goals of delivering and successfully architecting and implementing an enterprise-wide value framework across the continuum of poultry, cross-median processes. The meeting was held in a park-like setting, enabling and creating an impactful environment which was strategically based, industry focused, and built upon a consistent, clear, and unified market message and aligned with the chicken's mission, vision, and core values. This was conducive towards the creation of a total business integration solution. IBM Global Services helped the chicken change to become more successful.

Re:Dell?

[lucabrasi999]

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.

Re:Dell?

[wo1verin3]

Not quite a janitor...

There is no doubt IBM creates new technology... but in IBM PCD, I stand by the statement I made which you should be able to verify with your wife.

BTW Is she hot? :)

Re:Dell?

[sporty]

It's all statistics, eh? :)

-Somewhere in Redmond-

[stinky wizzleteats]

"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."

Re:-Somewhere in Redmond-

[Anonymous Coward]

Oh I think that IBM has plenty of its own history with the government to not need Microsoft's help here. You do remember that 20 years ago they were the evil empire.

Re:-Somewhere in Redmond-

[Darby]

Expect the usual donation, and good luck with the finding WMD thing.

Oh never mind about the whole WMD thing.

Wolfowitz already admitted they made the whole thing up

Re:I bet

[nharmon]

Martha Stewart may be responsible for insider trading and/or obstruction of justice. IBM may be responsible for fraudulent accounting. Apples and oranges dude.

Hmm...

[GreyOrange]

Well, the bigger they are the bigger they fall, unless they are so big that they fall upon themselves and recieve a cushioning effect.

The Humanity....

[Tsali]

The long, icy reach of SCO.... curses!

Oh wait? There is no conspiracy? Darn.

IBM Says SEC Probing Its Accounting

[Anonymous Coward]

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.

Re:IBM Says SEC Probing Its Accounting

[Anonymous Coward]

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.

Here is a possiblity that folks are overlooking: I used to work for an IBM competitor in the point-of-sale industry. That company was a big player in one little niche, and we competed vigorously with IBM. We would sometimes mysteriously loose large customer accounts (think big like McDonalds or Burger King sized deals) to IBM for 'mysterious' reasons.

Imagine for example, if big blue bundled various computer and IT infrastructure around a deal and gave away the POS equipment.

Not saying that they ever did, but if they pulled some crap like it would be very questionable business conduct. If the deal then went south with that customer....

Re:IBM Says SEC Probing Its Accounting

[Anonymous Coward]

it would be very questionable business conduct

Why would this be considered questionable business conduct? Think of the auto industry. I've heard that GM actually loses money for each Chevy Cavalier/Pontiac Sunfire it sells. The idea is that you build customer brand loyalty by selling the car, even at a loss.

Or consider Oracle. It is rumored that they offer their application software at a major discount, in order to steal customers away from SAP, PeopleSoft and/or Siebel. Then, they can make big $ on the Database software.

Assuming that IBM gave away the POS equipment, they are only trying to build loyalty to the services organization (where profits are higher). You call it *questionable*. I call it *running a business*.

Where did all the income come from?

[gpinzone]

Simple...they made it by stealing IP from SCO! Case closed!

Asbestos Post

[Bame Flait]

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.

Re:Asbestos Post

[Matrix272]

I think the answer is no regulation, or regulation by an independent (read: not government) third party. Members of the government are only concerned with getting themselves reelected, or getting raises. Companies that are directly involved have friends and enemies, and because of that, they want their friends to succeed and their enemies to fail. Independent third-parties are the only answer... just have to make sure they're non-profit.

I don't think anybody would argue that Health Care is a mess, although some might say it's only a mess because it's not ALL provided by the government. I think it's a mess because the government is involved FAR too much with rules and regulations and fines and everything else. Look at the IRS... it started with a 2% federal income tax, and now it's amazingly corrupt and inefficient. It wastes $225 billion a year! I digress though.

Re:Asbestos Post

[TheRaven64]

I hope the government sues IBM & M$ into oblivion.

I hope IBM sues MS and the government into oblivion. (And not just the US government, they can sue ours as well if they want.)

Re:Asbestos Post

[Anonymous Coward]

What's your point? Nobody is suggesting that IBM be socialized, only that they report their income properly. Regulated financial markets is a core principle of conservative capitalism, and something that even the corporatists in the white house fully support (after a few of their cronies were sent off to jail).

Also, a true "leftist" would generally oppose regulated financial markets as they mitigate the core contradictions in the capitalist system and postpone the historic inevitability of socialism.

Re:Asbestos Post

[NialScorva]

Because deregulation has worked *so* well in other places such as airlines, energy, and telecommunications, as well as the expected success of massive media mergers.

We should be returning to a simpler time without regulations. Oh how I long for the days of the robber barons, Standard Oil, and US Steel. Damn those muckrakers and progressives of the late 19th and early 20th century that destroyed our pure libertarian utopia and cast us from our industrial slavery paradise into the modern distopia of job safety requirements, anti-monopolistic laws, and a higher standard of living.

Re:Asbestos Post

[Petronius]

wish I had points to mod you up.

Re:Asbestos Post

[goldspider]

Ahh yes, we can only hope that someday we will take home $.25 on the dollar to pay for a parental government that makes all of our decisions for us. We all know that beaurocracies become more efficient and effective as they grow and take more control of our lives.

Work harder! Someone on welfare is counting on you!

Re:Asbestos Post

[matt4077]

mine too

Re:Asbestos Post

[municio]

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.

Before the uninformed opinions cries for massive deregulation, lets not forget that the market economy does not rely on deregulation, but in transparency and access to information. Too much regulation is bad in the sense that it can make transparency harder, (to many complex rules). But enough regulation is necessary to make sure that companies depict their finances accurately, so investors can make informed decisions.

For example, the only purpose of stock options is for companies to hide costs and make their company appear in a better light to the investors that don't have enough resources. This type of accounting practice creates market inefficiencies that only benefits big investors that have dedicate resources to uncover the real numbers. Of course, the executives of the companies that can obtain money from the investors without actually accounting for it also benefit. Obviously, big investors and mutual founds managers (the ones how take advantage of these inefficiencies), are also the people that appoint the executives.

Do not mistake market economy with deregulation. Don't believe either that a market economy is best for all situations. Ecology for example, is somewhere where market economy doesn't work (many times it makes economic sense to screw the earth).

Nothing new

[mao che minh]

Things like this (or at least stark criticism from investors) concerning IBM's accounting practices pop up about every couple of years. IBM always responds by releasing more information, making the requested changes, and working with their investors and/or the government to show them "see, we didn't do anything wrong."

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.

Re:Nothing new

[bludstone]

Yup.

Usually the stock takes a 10% hit or so. Takes a little while for the price to come back up. If IBM stock plummets, you better believe I'll be there to lap some of it up.

MMmmmm, Blue chips.. droooool~

Im not too concerned about this... unless its a CONSPIRACY. This opens huge doors for conspiracy theorists. Again.

Re:Nothing new

[Manic Ken]

Well, we dont see M$ get SEC'ed. I dont think they ever will. I dont even think it's possible, Bill Parish might know why :)

Re:Nothing new

[Manic Ken]

You are right!! I look like an idiot, I should have written that SEC turned up, had an chat and M$ was let go(I'll expect you to google on that) ;)

Doesn't matter at all

[jj_johny]

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.

Re:Doesn't matter at all

[Anonymous Coward]

Enron just shifted revenue too. Of course they shifted it from the far future using an accounting time machine. :-)

Re:Doesn't matter at all

[milo_Gwalthny]

My favorite way to illustrate how earnings are managed is to bring up a story from when I worked at big blue, 1990-ish.

I asked a work friend, a tech, to a new year's eve party I was having. He told me he couldn't come because he had to spend the night getting mainframes on trucks. Seems everyone in the facility (except us engineers--too soft, I guess--and management I assume) got drafted into getting more big iron shipped. You see, if it's on the truck prior to midnight, it's revenue in that year.

Of course, if it's revenue in that year then it's not revenue in the next year, so one year later they have to work twice as hard loading trucks. Then one year you run out of either trucks or iron and you miss your numbers. That's called paying the piper.

Re:Doesn't matter at all

[Anonymous Coward]

It works both ways. Customer's IT departments have budgets that expire Dec 31 and you don't get unspent money back. In fact, they reduce next year's budget because clearly you don't need it. So customers end up on a buying spree in Q4.

The main thing is that IBM should have rule about how the revenue gets booked (on the truck vs. not) and that rule should not be violated (a manager telling them to get it on the truck before new year's is ok, a manager lying about when it got on the truck is not).

Re:Doesn't matter at all

[milo_Gwalthny]

Both the IT departments' preponderance to order late in the year and the manufacturers temptation to compress the order-build-ship cycle late in the year create an accentuation of good years and bad years in regards to revenue. I suppose this should be expected by investors, but it always seems to take us by surprise (in both directions, I might add.)

IBM's rule here has to be the GAAP rule, which I believe they followed (at least as GAAP was interpreted at the time.) I do not believe that what they were doing was (a) illegal or (b) a violation of GAAP (and I would like to note for all you class action litigators out there that I do not remember the tech's name--so my testimony would be hearsay--and that my memory is spotty from too many years of sex drugs and rock and roll, so I would not be credible in any case.)

The story was simply an instance of them aggressively managing earnings, not creating them.

Re:Doesn't matter at all

[Waffle Iron]

SEC investigators have unearthed several tractor-trailers suspected of being IBM's "mobile mainframe warehouses". Intellegence sources hinted that these specially modified trucks were capable of storing unsold mainframe inventory for an indefinite period of time -- even though the inventory had been reported as "revenue" to teams of international auditors.

Initial field tests indicated that the trucks did indeed contain mainframe hardware. However, the final determination can only be made after full analysis of the racks of circuit boards and cables.

Authorities had long suspected the existence of these mobile facilities based on the accounts of disgruntled IBM employees who reportedly witnessed the loading of the trucks.

Re:Doesn't matter at all

[delcielo]

I get so sick of hearing the word "Enron" used to describe every possible business abnormality.

There is nothing "Enronish" about what the SEC is looking at. I understand that Enron has become a brand name for any corporate accounting misdeeds; but is there no standard at all for comparing any accounting issue at any company to Enron deliberately bilking millions from people?

Re:Doesn't matter at all

[iabervon]

It seems unlikely that there's actually a substantial amount of revenue expected at the beginning of the year that gets shifted to the previous year. I'd expect that almost all of the revenue early in the year comes from companies whose IT budgets have gone up, meaning that they can suddenly afford a mainframe; these can't be shifted to the previous year because they can't spend the money earlier. There's probably a certain amount of stuff that didn't get shipped in time for the end of the year which is left over, but it's probably not that much.

Although, these days, just about nobody actually uses calendar years for their business cycle, because there is always month-change and year-change paperwork, and it's easier on everybody if the quarter-change and financial-year-change paperwork is offset from that. Furthermore, it's beneficial if your company's paperwork doesn't coincide with other companies' paperwork exactly, so everybody's different.

It's one of the things that's a pain when you do a project involving business quarters.

Re:Doesn't matter at all

[Anonymous Coward]

A co-worker of mine used to test large industrial machines at our plant before delivery to the customer (we were still responsible for delivery and getting the whole thing working at their plant). At the end of every month there was a big push to get machines shipped, enough of a push where practically everyone in our plant worked overtime. Then, the first two weeks of the next month were slow -- no overtime, usually very easy to get time off, occasionally short-term layoffs. This cycle repeated every single month.

Between the overtime pay and the increased unemployment insurance costs, it must have cost the company a bunch of money compared to a steady pace throughout the month. And, the funny thing was, the big hustle to ship didn't mean the company was done with a project! The contracts must have been structured so that a portion of the price was payable at shipping or 30 days after shipping, letting the company book a bunch of revenue then.

Re:Doesn't matter at all

[blibbleblobble]

"Customer's IT departments have budgets that expire Dec 31 and you don't get unspent money back."

Strange... one would expect a more cynical accounting department to have their must-spend-now period some time other than the christmas party season.

Re:Doesn't matter at all

[MrWa]

This was the way that the semiconductor industry worked as well - if it was on the truck it counted as revenue. Things have changed recently thanks to SAB 101 which, basically, makes it so that revenue isn't counted until the customer accepts the product and pays for it.

How novel - you don't count the money until you get it. I just love accounting...being accounting, though, means that there are still exceptions and "interpretations" of the rules...

Re:Doesn't matter at all

[milo_Gwalthny]

Why they can't just ditch all the revenue recognition rules and use the catch-all "it ain't revenue until you earn it" (with earn being construed as cynically as possibel by the auditors) I don't know. Personally, I can't keep up with all the pronouncements... I am pretty sure this practice has been ruled away in the computer industry as well, though.

Re:Doesn't matter at all

[davidkw]

Not that unlikely. Many goverment agencies and large corporations sub-divisions funciton on use-it-or-lose-it budgets.... It leaves them spending at the end of the fiscal just to ensure that they keep their budget...

Probably a non-issue

[Alizarin Erythrosin]

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?)

Re:Probably a non-issue

[speculatrix]

Nobody ever got fired for buy^Hsting IBM

Re:Probably a non-issue

[DownTheLongRoad]

Enron goes much further than this. Enron was capitalizing the costs of garbage cans and other things that should have been expensed. When investors looked at Enron's assets, they looked huge and it seemed to be a good investment.

IBM appears to be reconizing revenue in the wrong quarter. It's fairly common since determining when revenue is recognized can get tricky.

I doubt it's too bad

[gerf]

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

Re:I doubt it's too bad

[Billly Gates]

But the point is that it will hurt IBM's stock as well as add fire to the SCO case.

After all, a sleezy lawyer from SCO could claim IBM already is under investigation by the SEC for other issues of fraud. With this as well as IBM having auditors for the linux code being released would make SCO's case more credible.

Your right its not an enron or worldcom by far but it sill is damaging to their corporate image and deffinetly their stock price. I wonder what it will close at at the end of the day.

The gartner group recently advised all large bussinesses not to install Linux because of the SCO threat. With this and an sec investigation will also make corporate customers interested in IBM machines to put their purchases on the backburner to see what happens. IBM is heavily associated with Linux and I am sure its Linux server division hit a nose dive from the lawsuit as well.

If SCO loses this lawsuit I hope IBM, RedHat, Linuxtag, and SuSE all countersue them out of existance in return. They have losing serious money from the current lawsuit.

Re:I doubt it's too bad

[arthurs_sidekick]

After all, a sleezy lawyer from SCO could claim IBM already is under investigation by the SEC for other issues of fraud.

Well, they could try that, but there's the small problem that while we're talking about the same corporate entity, we're not talking about the same people. With Enron, there appeared to be a widespread problem at the upper echelons, who all interacted on a regular basis, where in the current case, you've got your code monkeys in one place and your accountants in another. It's highly likely the IBM people involved in SCO's ridiculous case have ever met or even heard of the people involved in this SEC investigation.

It's hardly proof that the company's rotten to the core, and it would reek of desperation even more than SCO already does. Besides, SCO does not want this to go to court. They'd get slaughtered, and they know it, that's why it's all being played out at the PR level.

Re:I doubt it's too bad

[DavidBrown]

Forget about SCO. They don't have a leg to stand on, legally, by bringing up the SEC investigation unless it actually has something to do with SCO's dispute with IBM. Otherwise, the evidence would be deemed inadmissable as either irrelevant, or character evidence.

Yes, evidence of falsehood could be used to challenge the veracity of a witness - but not the general veracity of the defendant. In any event, an investigation does not equal guilt, and, believe it or not, our legal system recognzies this.

Computer != PC

[nharmon]

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.

Re:Computer != PC

[Jay]

Actually, since Amdahl/Fujitsu and Hitachi have mostly gotten out of the business, IBM *IS* the mainframe market.

And don't spew any of that crap about the E10K or SuperDome being a mainframe. They're not. Despite what the shiny brochure says, they're not.

Re:Computer != PC

[g_goblin]

Doesn't PC stand for Personal Computer?

Well,

[Morologous]

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.

Re:Well,

[Mostly a lurker]

If there is any real accounting irregularity involved here (and I still doubt it based on IBM's track record) I predict that it was without the knowledge of the top management and the board. While IBM can be a real hard nosed competitor, it always acts legally. On the other hand, there must be some reason for this investigation. Come on, where are the expert conspiracy theorists when we need them? Did they fail to pay enough towards the George Bush election fun?

Nice to see . . .

[Brad Cossette]

I've nothing against IBM, but seeing the SEC going after the big companies for "irregular accounting" is a good thing. Sometimes you can think these companies are immune to prosecution due to their massive size/legal teams - now, let's hope SEC makes it worthwhile.

In related news, isn't Martha Stewart getting charged soon? To quote Robin Williams, she's going to become someone's b*tch.

Re:Nice to see . . .

[TLouden]

"To quote Robin Williams, she's going to become someone's b*tch." That was a great show, and then there was Bush talking about the stock market.

So ?

[frodo from middle ea]

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 :-)

IBM

[Anonymous Coward]

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.

Re:IBM

[nelsonal]

Out of the frying pan into the fire, eh. Aren't you happy Accenture split and changed names prior to the whole Enron/Worldcom debacle.

Re:IBM

[sharkey]

Joe? Is that you?

nothing to worry about

[unk1911]

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.

Re:nothing to worry about

[I_redwolf]

This is a troll right? :) I mean I like IBM, However if I was alive at the time I'd probably feel indifferent towards them. It wasn't so long ago that IBM was in Microsoft's shoes... I shouldn't even make the comparison in power IBM had back then compared to Microsoft today. IBM back then was like god-mode. It took around 15 yrs or so for the DOJ to drop it's case against IBM. I was probably around 3 or 4 when the case was dropped heh.. In any event, if it wasn't for the Antitrust case against IBM oddly enough Microsoft would probably not be the software company it is today. IBM could of simply decided not to sell MS-DOS and then turn around and peddle PC-DOS like rabid dogs, but because of the Anti-Trust case they were on their tip toes at the time, scared to get into different markets etc etc. Now, things are coming full circle; IBM conceded the OS market to Microsoft; then. Tried to take it back with OS/2 but couldn't pull it off on any significant user or server level. It saw Linux coming down the pipe and made a smart move, probably before any other major player in the industry knew what Linux was.

Anyway; Going by your analogy... Microsoft will have a reputation of integrity, honesty and quality in another 15 -20 yrs. At least IBM throughout it's history has had quality and maybe has had to learn to exercise it's power and keep it's karma, intergrity and honesty in check. Microsoft has none of the above and will not have any of the above into the forseeable future unlike IBM instead of being on tip-toes Microsoft is entering different markets WHILE anti-trust cases go on.

Resting

[dubstop]

Ted: That money was resting in my account.

Dougal: Right. A good long rest.

Re:Resting

[Timesprout]

Good shout. Its a pity a lot of people here wont get that.

Re:Resting

[dubstop]

He did kick me up the arse!

Re:Resting

[ctrimble]

Very nice! Here's another one:

TED: This is what it's all about, a fine port, beautiful surroundings and intelligent company!
OLDER PRIEST: Did you not have all that at your last parish?
TED: (bitterly) No.
OLDER PRIEST: Dublin seems to suit you though, you've got a new-found gleam in your eye.
TED: Ah yes! I shall be staying here for a good while. As long as I don't mess it up for myself by doing something stupid.
PARISH ACCOUNTANT: Most of these accountants seem in order Father Smith. But I wonder could I ask Father Crilly about one or two of these things that he's put down under expenses.

Absolutely

[Bame Flait]

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.

Re:Absolutely

[NDPTAL85]

Don't be silly. For the most part regulation of ANY industry in the US is just fine. Noteable exceptions are California's energy sector and nationwide healthcare.

There's more to regulating industries than just making sure they aren't lying about their revenues. There's also safety, tax, international, and social issues which the government must also regulate each industry on.

Re:Absolutely

[Matrix272]

And why must the government regulate all those things? It seems fairly obvious to me... if you work for a company that isn't safe, quit. Tax is an abomination, and Alexander Hamilton agreed (at least on income tax). Sales tax can be regulated by each state. Most companies aren't international, so there's nothing to worry about there. And the social issues aren't issues. What social issues should the government regulate that they haven't already screwed up?

Re:Absolutely

[NDPTAL85]

Ok are you like a libertarian or something? Waiting until you find out coworkers have died before you find out a company isn't safe to work for isn't good enough. We live in a society not a jungle.

I'm really sorry you consider it an unnecssary hindrence on economic activity that the department of OSHA exists but too damned bad. Every developed nation has some sort of similar department which suggest not wanting to die while at work is some sort of commmon human desire. Even if abolished how many years and headlines of horror stories do you think it would take for it to be restored?

Excessive taxes are an abomination not just taxes at all. The US has some of the lowest tax rates, income/sales in the western world. To complain about them is simply retarded. I mean we could do away with any and all social services. Then you could pay for your own personal security force and only the affluent would be afforded safety. When the unwashed masses begin to revolt however things might get hairy.

If you ARE a libertarian my question is this. If you could have your way and abolish the laws and regulations you hate how long would you expect the populace to put up with the country considering that the quality of life for millions would be severely decreased? And if the changes would be overturned quickly what would be the point in enacting them in the first place?

Re:Absolutely

[Matrix272]

Yes, I am a libertarian, as a matter of fact. The last job I had was unsafe, and nobody had to die before I came to that conclusion. I don't think taking everything to the extreme is a good way to accurately access any situation.

Tell me this: Why should I have to pay money to the government for them to tell stupid people that they're doing something stupid? You would think that the average person knows that having radioactive material laying around probably isn't good. On the other hand, does it REALLY take government intervention to tell us how unsafe a doorknob handle that's 2 inches too high is? Have you ever gotten hurt by a doorknob (that you couldn't attribute to something you instigated)?

Since when do we judge what's morally or fiscally correct by what others are doing? Didn't your mother ever tell you not to jump off a bridge if your friends are? I personally don't care what Canada, France, Mexico, England, Germany, Russia, Australia, etc. do about their tax situation. I don't live there, and I don't pay taxes there. I live in the United States, and I believe that taking the money I earn and giving it to people that continually and consistently do stupid things is an abomination.

Don't misunderstand the libertarian position. We're not for anarchy. I never said to decrease the funding to law enforcement (although they could use some massive changes in their procedures and policies). I said to fund them locally or by the state, not the federal government. Until Lincoln, each state had the ability to leave the Union if the federal government did something contrary to that state's interests... now there's nothing to keep the federal government in check, so they're spiraling far out of control. The only way to take it back is by starving it of the only thing they care about -- money.

Re:Absolutely

[NDPTAL85]

The Federal government is always in check. This is still a democracy and the voters have the final say whether its municipal, state or federal politics. Being able to leave the Union is um counter to your claims of not wanting anarchy. What power would the Federal government have if the states could decide to just up and leave over any issue they wanted to? Further what would stop individual cities and towns from breaking off from the states themselves if they get miffed? Where does it end?
The US would be similar to the current EU then. Very little federal cohesion and as a result a weakend indecisive nation overall.

A part of being a part of a nation is relinquishing some rights and freedoms for the good of the nation. Unless each of the 50 states wants to be its own pathetic nation-state we're better off now than we would be with your proposal.

This also suggests some shortsightedness. Instead of a strong America, you'd rather say Ohio break off from the Union if some farming law affects it negatively. What if the US had broken up into say four regions before WWII? Do you think we could have assisted appropriately not just in the defeat of Hitler but the reformation of western europe? Do you think that a loose co-alition of former US states would have anywhere the collective military might of the current US? Are you going to try to argue that if this nation simply minded our own business everything would just be fine and we'd never have to go to war except for a direct attack on or own soil?

For the most part, local police and state police ARE locally/state funded. The FBI is the federal police not the NYPD or The Boston PD or the Louisiana State Troopers...etc.

Yes we DO judge whats morally/fiscally correct by what others do. On a small scale people do so with their neighbors/friends/families. On a statewide scale towns and cities size each other up. On a national scale states compare themselves against other states (California's economy is bigger than Texas's so now Texas enacts some pro-business reforms...etc) and nations with other nations. Why else do you think we have a World Economic Forum or World Bank or International Monetary Fund? If none of these nations cared how well the others were doing economically they wouldn't be members of those organizations.

So yes it is entirely appropriate to say, since the US has lower taxes then the rest of most of the Western World you are bitching without cause. That doesn't mean you have to stop complaining, it just means in the grand scheme of things its not the abomination you make it out to be. Sometimes a little bit of perspective helps you understand that.

Re:Absolutely

[Matrix272]

I would suggest you read the Constitution if you don't understand the planned interactions between the federal government and the states. I'm not going to go into great detail, but I would highly recommend reading the original documents that defined and gave birth to this nation... then reconsider your thoughts about anarchy and democracy.

While I'm on that topic, the United States is not a democracy. It never was, and hopefully never will be. We are a Representative Republic. Again, read the Constitution if you need further clarification.

So the rest of society dictates your morals? Ouch... So you must be one of those people who thinks that since everyone is doing it, it must be OK, right? Economics has a direct effect on others, so those others have to be concerned with how things are going.

You might as well say that since Windows XP is the best Windows version yet, there's no need to go any further. Just because it's the best available doesn't mean it's good. Yes, the United States has some of the lowest taxes in the world, and it's the best country in the developed world (arguably)... doesn't mean it's good. It means it's RELATIVELY good. It's perspective that you lack. Sure, this country is wonderful in most respects... doesn't mean it can't be better, or that it's good. It just means that the other countries in the world with higher taxes are worse (in that respect).

Re:Absolutely

[NDPTAL85]

The Constitution is not set in stone. Obviously the authors of the document understood this when they made it alterable. Just because they had a plan for how the Federal government should interact with the states why do you think that applies to the way the world is today, two hundred and twenty five years later? I am getting the impression and not just from you that Libertarians believe the nation should be run the way it was run back in 1776 and any major changes to the laws since then are an abomination.

I know the difference between a Representative Republic and a Democracy. I use the term Democracy for any type of Western government be it a Representative Republic like ours, a Palimentary Monarchy like the UK or whatever the heck those crazy Danes have. If your citizens can vote, to me its a Democracy.

Realtitivty is not such a bad way to measure yourself or others. Ideals are nice but they aren't based in reality. While they should always be strived for if you go too hard you're feet leave the ground and your head is stuck in the clouds. We're already working on lowering taxes, did you miss the recent $350 billion tax cut or something? Of course there's always room for improvement. I never said there isn't.

Re:Absolutely

[Matrix272]

The people that found this country understood what they were doing when they made the Constitution. They made it amendable in case the future held things they didn't expect... but they also wanted to keep the checks and balances they intended 225 years ago. One of those was between the states and the federal government. Think about where they came from... They came from places where the federal government got out of control and nobody could do anything about it. The Tories and the Whigs are the same as the Democrats and Republicans today. They sit at tables and go round and round until everyone loses interest and gets frustrated and nothing is ever fixed. One of the things the Founding Fathers did NOT want is a state-mandated religion... and by them saying that, over the next 200 years it's gotten to point that saying the word "God" in any publicly owned building can get you fined. That's ridiculous.

Another thing they didn't want is a federal income tax. They had no problem with sales tax, as long as it was kept within reason, but the first Secretary of Treasury, Alexander Hamilton, wrote an article about the views on income tax and sales tax in the Federalist papers (No. 21). The link to a good portion of that article is here.

The Founding Fathers knew the dangers of having a government too powerful, and even built in provisions for a revolt, should things get out of control. The most obvious provision is the right to bear arms, which is the 2nd amendment. Apparently they thought the right to bear arms was just slightly less important than the right to freedom of speech, press, assembly, and religion.

At the same time, the Founding Fathers did make a few mistakes... they didn't allow black people or women to vote. In their day, they didn't recognize those individuals as people in the same standing in society as land-owning white males. That's why they made the Constitution amendable... but not alterable.

Saying that any country that allows their citizens to vote is a democracy is a very, very dangerous assumption. By that logic, Iraq was a democracy. Obviously, there are more criterion to meet to be a democracy than allowing people to vote.

Again, I have to say that relativity is of some value in comparison, but it's only a comparison... not a static evaluation. Let me put it this way... there's far more room for improvement than there was 100 years ago. Does that make my stance a little more understandable?

-Somewhere in DC-

[curtisk]

Nice! :D

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

Re:-Somewhere in DC-

[Gorm the DBA]

Down 25.07 points out of ~9000 (as of 1:40 PM EST) is slamming? Umm...folks...that's not even a third of one percent of the Dow.

Plus, IBM ain't gonna be going bankrupt. They won't even see a blip. And no, I don't own any IBM stock (all my investments are in student loan debt).

Re:-Somewhere in DC-

[curtisk]

LOL, I'm not gonna debate the state the Dow with you, I meant not so much the math, but the attitude,confidence.....

IBM's announcement certainly cast a pall over things, since it reminds investors of the nasty days of last year when many companies were being investigated for accounting scandals and corporate malfeasance. The fact that IBM announced the probe is sobering," Scott Kuensell, managing director of Brandywine Asset Management, which oversees assets of $9 billion.

I agree that this will not be a big deal, though and SEC probes are not that uncommon

Software

[WPIDalamar]

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!

SALE ON IBM STOCK!

[doublem]

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.

News for Nerds

[watzinaneihm]

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?

Re:News for Nerds

[svpernova]

".ACMD setaloiv siht gnidaeR" thats just hysterical!

Re:News for Nerds

[gearheadsmp]

Well, other than the fact that IBM is a key ball player in the Corporate Linux market. By any means, IBM releases more Open Source code than Apple does.

Re:News for Nerds

[Darby]

Did Iraq have WMD?

Well, Wolfowitz just admitted that they made the whole thing up, so no.

Re:News for Nerds

[Darby]

Ha, you fell into his trap.
You're clear of DMCA violations, but he can get you on copyright now.

No need for alarm

[DangerousDee]

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.

misleading

[egoff]

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.

Re:Leute, Leute...

[UnknowingFool]

... man beginnt mit Untersuchungen. Das ist noch lange kein Beweis von irgendwelchen Unregelmäßigkeiten. Da kann von Pleitegeier noch lange keine Rede sein.

Sure, that's all true but . . .
Sprechen Sie Englisch?

Re:Leute, Leute...

[Cray MCP]

Mit dem hirnrissigen Kommentar hast du dich selbst zu einem gemacht. Dumm, dumm...

New nick name on the rise?

[jabbadabbadoo]

Accounting... Big Blue...

Big Red?

Ouchh.

Re:New nick name on the rise?

[sharkey]

Big Red?

Keep your bucks a little longer, keep your cents a little longer, give your books long lasting plumpness, while you stew it!

Who's Grant? Is he IBM's version of MS's Parish?

[leandrod]

Does anyone have more pointers to this Grant, and knows if he has information on IBM comparable to what Bill Parish has on Microsoft?

Re:Leute, Leute...

[EllF]

Warum sprechen Sie Deutsch hier? Es ist klar, dass Sie konnen Englisch. Glauben Sie dass schreiben auf Deutsch machen Sie kuhl? Oder ist es noch etwas?

More than that, too

[siskbc]

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.

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.

Re:More than that, too

[siskbc]

DELL makes nothing other than rebranded final products into a computer. something that even a monkey can do.

I dunno man...I remember that guy from those stupid Dell commercials. That guy they call "The Customizer," he looked pretty highly trained.

Re:More than that, too

[b17bmbr]

damnit, where's my mod points. +1 funny.

maybe he was off smoking ganj with the "dude" guy.

UPDATE: IBM PRESS RELEASE

[SuperDuG]

For immediate release:

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

I'll reply to :Asbestos Post because

[MisanthropicProggram]

This is sort of on the same line of thought ...

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!

Re:Leute, Leute...

[EllF]

Not fished, friend. Ich spreche Deutsch, y espanol, and English.

oh, and why are speaking german Cray MCP?

You, apparently, do not.

Re:Leute, Leute...

[Cray MCP]

I was never good in foreign languages in school. I can read English texts and understand them. But I think it's better to write correct terms in the language which I can handle better, instead of disgress myself with embarrassing mistakes.

I'm confused as to how this works...

[Exitthree]

Is it:

1. ???
2. Get investigated by SEC
3. Profit!

or:

1. Profit!
2. ???
3. Get investigated by SEC

Any insight?

Re:I'm confused as to how this works...

[tpengster]

It's more like this:

1. ???
2. Profit!
3. Get investigated by SEC

What's up with the "It's Coming Soon" lady?

[ElitusPrime]

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...

In other news

[revividus]

remaining Enron shareholders are suing IBM for a billion dollars, stating that they have proof that proprietary "Enron accounting practices" were used in IBM's bookkeeping.

Microsoft has already agreed to pay Enron for a license to use these same accounting practices.

Re:Leute, Leute...

[wjvdt]

if you're as bored as I am, take this thread to babelfish.altavista.com

story of small-time fraud from the IT trenches

[Pfhreakaz0id]

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?

Re:story of small-time fraud from the IT trenches

[Lord_Slepnir]

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...

Re:story of small-time fraud from the IT trenches

[swordboy]

Nothing at all (although we fixed the system).

See, there was a glitch in payroll. He was supposed to be fired years ago, but for some reason he kept getting a paycheck.

We, uhh... fixed the glitch!

Re:story of small-time fraud from the IT trenches

[iggymanz]

At least he didn't invite you and your friend over to his beachfront home for the weekend as houseguests so an assasin would whack you, but got whacked himself instead, so you had to carry his corpse around everywhere fooling everyone that he was still alive.....

Datapoint ditto to the max

[A nonymous Coward]

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.

Re:Datapoint ditto to the max

[SN74S181]

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.

Your sig

[MSBob]

While your equation is true remember that:
Communism = (~innovation)&&(~democracy)&&(~freedom )

Re:Your sig

[freestyle-fiend]

Why do you think of Communism (i.e. Marxism) as the alternative to capitalism? Is it because you consider it a success, because your point is only true for the weakest non-capitalist system or because you don't know any other alternatives to capitalism?

Re:Leute, Leute...

[narfbot]

ja, das finde ich auch, aber dies ist slashdot. sie verstehen nicht selbst wenn wir sprechen englisch.

Therefore Capitalism == Communism, wtf?

[gwappo]

While your equation is true remember that:

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.

cruxes (?) of Enron/Worldcom problems

[zptdooda]

"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.

Re:cruxes (?) of Enron/Worldcom problems

[Anonymous Coward]

I quite agree. These days the SEC feels the need to investigate companies to see if they are guilty rather than simply combing the smoking wreckage after they go bust. (I wonder why?)
Revenue recognition is the most common form of restatement of previous SEC filings and is rarly serious (though it's never actually good either). Typical breaches of SAB 101 "Revenue Recognition" include booking receipts for multi-year warranty schemes up front. The main problem with SAB 101 is that it gets really tricky deciding how much of ,say, a 50k contract is for hardware (bookable on delivery), Installation (bookable as the work is substantially completed) and how much is for the 5 year warranty (bookable evenly over 5 years). Taking a biased view on the subjective areas is one way to get your numbers on target.

Re:cruxes (?) of Enron/Worldcom problems

[Ungrounded Lightning]

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.

One of the telecoms got into trouble for doing exactly the opposite: They accounted several billion in operating expenses as capital expenditure.

So money that was just gone for things like wages, electric bills, and gasoline looked like it had bought a few billion in equipment. When the auditors looked around they discovered the company had a few billion less in plant equipment than the books showed, making the book value of the investors stock a lot less.

Oops!

A Long & Hidden History

[DrSkwid]

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

Re:A Long & Hidden History

[Anonymous Coward]

Have you bought anything made in the USA?

Damn you, you're responsible for funding the atomic bombs dropped on Hiroshima and Nagasaki.

Bought German beer lately? Nazi.

Diamonds? Nothing like genocide in Africa, eh?

A car? So you don't care about the Earth, either?

Wanna play the blame game? You're responsible for backing horrible deeds yourself, just by purchasing any product on the market.

I do love the bit about the founder. Maybe one day you'll wake up and realize that, hey - despite what Congress says, corporations ain't people.

Re:A Long & Hidden History

[DahGhostfacedFiddlah]

I don't think anyone here denied that IBM has been quite evil in the past, and there's a good chance it will revert to that at some point in the future. But in the glorious, glorious now, it's the closest thing Linux has to a guardian angel.

Re:A Long & Hidden History

[Anonymous Coward]

Tomas Watson received that honor in 1937 (according to you, which I won't check up on now), a year before Hitler was Time's Man of the Year in 1938 (http://history1900s.about.com/library/weekly/aa05 0400a.htm).

Yeah, the Nazi government of Germany was up to no good back then, but no one realized what was going on til later (Man of the Year! Amazing! OK, I guess it's one of those things that most people here already knew).

So, I guess I have to say that I'm not sure what point you think you're making ... (troll?)

Re:A Long & Hidden History

[Eminence]

Yeah, the Nazi government of Germany was up to no good back then, but no one realized what was going on til later (Man of the Year! Amazing! OK, I guess it's one of those things that most people here already knew).

No one? Hm... Read (or listen to) some Churchil speeches from that time (like this one). It seems he knew. Also, Polish secret service was reading Enigma-encrypted German communications, so they too knew quite well what was coming. French secret service knew all along although their politicians believed in the Maginot line too much to do anything real (but some like de Gaulle wrote books about what was to happen to awaken the public).

Actually he doesn't need the economy to get better

[burgburgburg]

That's what Iran, Syria and North Korea are for.

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?

"try to avert a flame war" ... "leftist cries"

[burgburgburg]

Didn't make it past the first full paragraph. Darn.

Reset and try again please.

Re:"try to avert a flame war" ... "leftist cries"

[SN74S181]

Your reading assignments for this week are: 'On The Correct Handling Of Contridictions Among The People' by Mao Zedong and 'Combat Liberalism' by V.I. Lenin. Please come to the discussion group prepared to discuss the correct line forward expressed in these works.

Re:"try to avert a flame war" ... "leftist cries"

[SN74S181]

That sounds like modern liberals, almost to a t. He also referred to them as useful idiots.

Re:NEWS FOR NERDS?

[jobugeek]

What are you talking about? Worldcom and Enron were awesome at it.

Independent third parties

[burgburgburg]

I trust the functioning of independent third parties. I also believe in the functioning of independent outside board members. And I have faith in the functioning of independent tooth fairies.

I think past experience and my big pile of quarters show I'm right.

Re:What a joke.

[merdark]

Right on.

Re:Leute, Leute...

[Slime-dogg]

Hah... That's pretty funny.

The eggs of Satan have NO Eggs! It uses brown sugar, Hashish (turkish), a half pound of butter? and nuts and vanilla extract...

Looks like you would have a pretty relaxing time with those "eggs"

Re:Leute, Leute...

[PetWolverine]

For an English-speaking person, it's easier to understand broken English than flawless German.

Of course the reverse is true, but my German is rusty enough that to try to post this in German would make me look like a fool. Nothing like a bit of hypocrisy...

Re:POS?!?!

[PetWolverine]

You don't know much geek history, do you?

Re:What a joke.

[PetWolverine]

The difference between MS and IBM is that MS is still evil, whereas IBM gave up on the dark side long ago. If you actually followed the history of the two companies, you might equate the 198X model year IBM with the current MS, but the current IBM plays by the rules.

RingTFA would also allay some fears. It sounds like it's a very specific problem, in a specific department dealing with a specific customer. IBM isn't even being investigated for its own accounting practices so much as for this customer's accounting practices.

reminds me of one of the better quotes...

[MORTAR_COMBAT!]

In communism, man exploits man. In capitalism, it's the other way around.

Re:reminds me of one of the better quotes...

[stinky wizzleteats]

MORTAR COMBAT

I prefer the name as it is referred to by the participants - corpse producing combat volleyball.

Re:I bet

[uncoveror]

You know, that wouldn't surprise me. IBM has agents and moles all over the place. I wonder if the SEC will uncover any of the really criminal stuff IBM is into. A little securities fraud is small potatoes.

...certain customer transactions

[msobkow]

Hughes said he would not name the customer.

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.

On the down side

[wayward_son]

They can't really blame it on a computer error, can they?

If IT were Futurama - Re:More than that, too

[MystikPhish]

Dell = Fry : Delivery Boy

But IBM = Dr. Farnsworth : 100 Year old Nobel Prize winning(seeking?) mad scientist

Ein OS, Ein GPL, Ein IBM?

[DrSkwid]

Are you reasonably suggesting that the Linux world would collapse if IBM killed it's Linux legion?

Re:Ein OS, Ein GPL, Ein IBM?

[DahGhostfacedFiddlah]

Oh god no - any more than I'm suggesting that we'd all fall out of a window and die without our real-world guardian angels. I'm just saying that we should be happy for the staunch corporate ally we have in Linux. From what I hear of the culture at IBM, it's very pro-Linux - not just about making money (although that's the root of their push, of course)

Re:wrong information

[chriscooper1470]

IBM said after the close of trading Monday that it had received a notice of a formal SEC investigation primarily concerning "certain types of customer transactions." Spokesmen for IBM declined to elaborate.

Pot. Meet Kettle.

[Flyph]

Somewhere, there has to be many former Enron and Worldcom execs preparing a welcome to the club party for Sam Palmisano. (IBM CEO)

not exactly true

[zogger]

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

Re:Veiled Eyes

[xutopia]

Andy is his CNN corresponsal nickname so you wasps can trust him

CNN and trust in the same sentence? Are you kidding?