IBM Says SEC Probing Its Accounting 241
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."
Dell? (Score:2, Funny)
Re:Dell? (Score:3, Informative)
Re:Dell? (Score:3, Interesting)
Re:Dell? (Score:3, Offtopic)
Re:Dell? (Score:2)
Re:Dell? (Score:5, Funny)
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? (Score:5, Informative)
Re:Dell? (Score:3, Informative)
Source: IBM 2002 Annual Report [ibm.com]
JoAnn
Re:Dell? (Score:2, Informative)
Re:Dell? (Score:4, Funny)
Re:Dell? (Score:2, Informative)
Computer != PC (Score:5, Informative)
Just because Dell sells more PC, that doesn't make them the largest "computer" company.
Re:Computer != PC (Score:3, Interesting)
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.
More than that, too (Score:5, Informative)
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.
If IT were Futurama - Re:More than that, too (Score:2, Funny)
But IBM = Dr. Farnsworth : 100 Year old Nobel Prize winning(seeking?) mad scientist
Re:More than that, too (Score:2)
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 (Score:2)
maybe he was off smoking ganj with the "dude" guy.
Re:Dell? (Score:2, Informative)
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? (Score:2, Informative)
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-
-Somewhere in Redmond- (Score:5, Funny)
"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."
-Somewhere in DC- (Score:3, Funny)
funny stuff!
As I was reading your post I Imagined it as a Get your war ON! [mnftiu.cc] 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
Actually he doesn't need the economy to get better (Score:2)
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?
Re:-Somewhere in DC- (Score:2)
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- (Score:2)
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
Re:-Somewhere in Redmond- (Score:2, Insightful)
Your sig (Score:2)
Communism = (~innovation)&&(~democracy)&&(~freedom )
Therefore Capitalism == Communism, wtf? (Score:3, Funny)
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.
reminds me of one of the better quotes... (Score:3, Insightful)
Re:reminds me of one of the better quotes... (Score:3, Funny)
MORTAR COMBAT
I prefer the name as it is referred to by the participants - corpse producing combat volleyball.
Re:-Somewhere in Redmond- (Score:2)
Oh never mind about the whole WMD thing.
[independent.co.uk]
Wolfowitz already admitted they made the whole thing up
Hmm... (Score:3, Funny)
The Humanity.... (Score:3, Funny)
Oh wait? There is no conspiracy? Darn.
IBM Says SEC Probing Its Accounting (Score:5, Informative)
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 (Score:2, Interesting)
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
Re:IBM Says SEC Probing Its Accounting (Score:2, Insightful)
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 t
...certain customer transactions (Score:2)
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
Where did all the income come from? (Score:5, Funny)
Asbestos Post (Score:4, Insightful)
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 (Score:2, Insightful)
I don't think anybody would argue that Health Care is a mess, althou
Independent third parties (Score:3, Funny)
I think past experience and my big pile of quarters show I'm right.
Re:Absolutely (Score:2)
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 (Score:2)
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
Re:Absolutely (Score:2)
The US would be s
Re:Absolutely (Score:2)
Re:Asbestos Post (Score:2)
Re:Asbestos Post (Score:2, Insightful)
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 (Score:2, Funny)
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 sa
"try to avert a flame war" ... "leftist cries" (Score:3, Funny)
Reset and try again please.
Re:"try to avert a flame war" ... "leftist cries" (Score:2, Funny)
Re:Asbestos Post (Score:5, Funny)
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 (Score:2)
Nothing new (Score:5, Interesting)
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 (Score:3, Interesting)
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.
Doesn't matter at all (Score:5, Informative)
Re:Doesn't matter at all (Score:5, Funny)
Re:Doesn't matter at all (Score:5, Interesting)
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 (Score:2, Informative)
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 (Score:3, Informative)
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
Re:Doesn't matter at all (Score:2)
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 (Score:2, Funny)
Initial field tests indicated that the trucks did indeed contain mainframe hardware. However, the final determination can only be made after full analys
Datapoint ditto to the max (Score:4, Interesting)
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 (Score:2, Informative)
Re:Doesn't matter at all (Score:3, Informative)
Re:Doesn't matter at all (Score:2)
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?
Probably a non-issue (Score:4, Interesting)
I doubt it's too bad (Score:4, Interesting)
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 (Score:4, Insightful)
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 (Score:2)
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.
So ? (Score:5, Insightful)
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
Resting (Score:2, Funny)
Dougal: Right. A good long rest.
Re:Resting (Score:2)
Software (Score:5, Funny)
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! (Score:2)
By the time I can convert into IBM stock this will probably ahve blown over.
Damn.
News for Nerds (Score:5, Insightful)
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 [slashdot.org] on slashdot
Did Iraq have WMD?
Re: (Score:2)
Re:News for Nerds (Score:2)
Well, Wolfowitz just admitted that they made the whole thing up [independent.co.uk], so no.
Re:News for Nerds (Score:2)
You're clear of DMCA violations, but he can get you on copyright now.
No need for alarm (Score:5, Informative)
misleading (Score:3, Insightful)
New nick name on the rise? (Score:2, Funny)
Big Red?
Ouchh.
Re:New nick name on the rise? (Score:2)
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? (Score:2)
Does anyone have more pointers to this Grant [grantspub.com], and knows if he has information on IBM comparable to what Bill Parish [billparish.com.] has on Microsoft [billparish.com.]?
UPDATE: IBM PRESS RELEASE (Score:4, Funny)
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'm confused as to how this works... (Score:2, Funny)
In other news (Score:3, Funny)
Microsoft has already agreed to pay Enron for a license to use these same accounting practices.
story of small-time fraud from the IT trenches (Score:5, Interesting)
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 (Score:3, Informative)
Re:story of small-time fraud from the IT trenches (Score:2)
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 (Score:2)
cruxes (?) of Enron/Worldcom problems (Score:5, Insightful)
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 (Score:2, Offtopic)
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 equ
A Long & Hidden History (Score:3, Informative)
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 [edwinblack.com]
Ein OS, Ein GPL, Ein IBM? (Score:2)
On the down side (Score:2)
Re:Leute, Leute... (Score:2)
Re:Leute, Leute... (Score:2)
oh, and why are speaking german Cray MCP?
You, apparently, do not.
Re:Leute, Leute... (Score:2)
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:nothing to worry about (Score:2)
Re:IBM (Score:2)
Re:Well, (Score:2)