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SEC Formally Investigates IBM

Posted by Zonk on from the trouble-for-big-blue dept.

glhturbo writes "IBM announced Thursday that it had received notice of a formal, nonpublic investigation by the Securities and Exchange Commission (SEC) concerning the company's disclosures relating to Q1 2005 earnings and expensing of equity compensation. According to the article, there has been a non-formal investigation going on since June 2005. Both articles indicate that it doesn't mean IBM has broken any laws, so we'll see what comes of it."

6 of 61 comments (clear)

  1. IBM is dirtier than they appear by Anonymous Coward · · Score: 2, Interesting

    I've unfortunately had personal experience working with IBM. I don't know why they do it, but they are the greediest company I've ever seen in action up close and personal. I've personally seen their project managers fake work, make work when there was none, and drag a project out for years. Maybe you all think that's business as usual, but I thought it was pretty bad.

    1. Re:IBM is dirtier than they appear by ThePhilips · · Score: 3, Interesting

      I have bystander knowledge of IBM only. All I can say this guys have too much experience.

      They quite good at separating "good product" from "cash cow" lines. What you describe is sort'a pet projects for investors. Normally this is products which look great on paper - but in reality make no sense. Investors of course care more about what's on paper. We as customers care more about product.

      As an example, take one of my projects. (*Not* for IBM.) The project consisted of two parts: big ugly brick under table and external controller (a-la joystick with screen). Excluding my manager, there were about 5 more managers who were "tracking" the project. Guess which part of it they were interested? Of course joystick with screen! My manager used that fact to distract people from main system unit and give me time and place to do my job. The guy who was on the joystick part had less luck (but quite much fun): day long meetings every week about how joystick movement feels, some sales coming constantly and arguing long about where company logo has to be, etc. You can imaging. Secret was that joystick was ready about the time hardware for main system unit was ready - iow it was finished already when all meetings took part. But since it was unusable w/o system unit - it was considered part of single project, rather than separate project. We were ready on dead-line. What we did one way or another highlighted that all those meetings were waste of time. "Nevermind" as my manager used to comment on that.

      That has taught me that in some companies managers in fact has to do lots of work to allow mere developers to do the job. When you look inside - it might look like scam. But as long as job gets done and company has something to sell - that's okay. In big companies it is just too much interested parties - some-one has to keep them at bay, so that normal work can go on.

      --
      All hope abandon ye who enter here.
  2. Re:Do other industries get as much attention? by Roydd+McWilson · · Score: 2, Interesting

    It's not because they're tech companies per se; a lot of these investigations are due to shady accounting. Indeed, many of the major accounting firms have been investigated, particularly for possible interactions between their accounting services and audit divisions. One of the common irregularities has been not correctly accounting for compensation in the form of stocks and options as expenses: this is detrimental to existing shareholders and the IRS. Tech companies tend to prefer to reinvest in their own business rather than pay out dividends. This is because the industry has a lot of small, quickly growing companies, and the others follow suit in their practices because it benefits managers. The result is that stock is valued for its resale price, rather than as a source of contuining income the company has to pay out--so stock-based compensation has been seen as a way to essentially print money! The problem is that unscrupulous managers can manipulate figures to make it look like the stock or options cost them less than they did. So you see, it really has nothing to do with technology at all.

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    THE NERD IS THE COMPUTER.
  3. It's about politics by yog · · Score: 3, Interesting

    These SEC and New York AG investigation orgies are more about politics than about protecting the public from evil corporate behavior. For example, in the case of Eliot Spitzer, the New York Attorney General, it's about how to use his job as a springboard to the governorship. He talks a tough line about long time insurance industry practices that are of questionable harm, caused the resignation of AIG CEO Hank Greenberg, and is continuing to go after this company as though it's the incarnation of evil. He waxes eloquent about how these companies hurt the common consumer, when in fact he has little grounds for such a claim. But it plays well on network news.

    The SEC can pretty much go after anyone they feel like. Any large company is bound to have a few irregularities in their procedures. Whether this merits the kind of microscopic scrutiny that the SEC has been utilizing in recent years is another question. IBM is a company with a history of being completely cooperative with the feds when it comes to monopolistic practices. Intel and Cisco are similar. They announce full cooperation, make their procedures transparent, and the feds either go away or slap them on the wrist with a fine of a few million for some technicality.

    We in the U.S. are our own worst enemies; while our corporations labor under a host of rules and regulations that are often contradictory and sometimes counter-productive, companies in places like China are charging full steam ahead, eating our lunch. It riles me to read about yet another strike for "fair pay and working conditions" or another city trying to levy new taxes on its local industries even as overseas firms proceed to take over nearly every manufacturing sector but military related.

    I think the United States should take one state and declare it a Special Economic Zone where manufacturing can be conducted tax free and with only basic checks and controls. Keep the "watchdog" agencies like the SEC off their backs and just let them compete. We will probably be surprised at the competition and productivity that will result.

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    it's = "it is"; its = possessive. E.g., it's flapping its wings.
  4. Mmmmm. by Famanoran · · Score: 2, Interesting

    I work for IBM. I'm not worried. As other posters have stated, this appears to be a non-story. In fact, this is the first I've heard of this.

  5. Even when they do right, it is wrong by LouisJBouchard · · Score: 3, Interesting

    OK,

    According to the article, it looks like IBM was looking to start to expense stock options prior to the new SEC rules taking effect. If looks like they sprung it on everyone at the last minute which put analysts in an uproar because they had to readjust their numbers at the last minute, then the expenses were not in line with what the analysts predicted (were actually less).

    Simply put, IBM tried to do the right thing for its investors and the public but flubbed it and the government now seems hell bent to punish IBM (They have been looking for something for years regarding investor relations) and will not stop until they get something, even if it is a technicality. This allows them to say that they are going after the big guys while getting the Enron execs off the hook.

    IBM really did nothing wrong. They simply followed public opinion and did what the SEC was going to require them to do anyways. In actuality, the SEC should use this to guide other companies into complying with the new rules since IBM was the first. Instead, they are going to punish IBM.