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IBM The Almighty Buck

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."
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IBM Says SEC Probing Its Accounting

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  • Dell? (Score:2, Funny)

    by Matrix272 ( 581458 )
    I thought Dell was the World's Largest Computer Company...?

    • Re:Dell? (Score:3, Informative)

      by ThatWeasel ( 113982 )
      I think it's: Dell is the U.S. leader in PC sales and IBM is the international/world leader.
    • Re:Dell? (Score:3, Interesting)

      by sporty ( 27564 )
      Depends on how you define "big". IBM may make more money on corperate stuff. Dell makes most in home sales.
      • Re:Dell? (Score:3, Offtopic)

        by TopShelf ( 92521 )
        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...
        • It's all statistics, eh? :)
    • Re:Dell? (Score:5, Informative)

      by Xrikcus ( 207545 ) on Tuesday June 03, 2003 @11:33AM (#6105894)
      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? (Score:3, Informative)

        by technomom ( 444378 )
        ....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 [ibm.com]

    • Re:Dell? (Score:4, Funny)

      by DrTentacle ( 469268 ) on Tuesday June 03, 2003 @11:33AM (#6105905)
      They've obviously heard about IBM buying out SCO any time now...that's sure to make them the biggest...
    • Re:Dell? (Score:2, Informative)

      by p0ppe ( 246551 )
      In terms of shipped computers, perhaps. In terms of revenue and mkt cap, no. Not even close.
    • Computer != PC (Score:5, Informative)

      by nharmon ( 97591 ) on Tuesday June 03, 2003 @11:37AM (#6105941)
      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 (Score:3, Interesting)

        by Jay ( 1991 )
        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.

      • More than that, too (Score:5, Informative)

        by siskbc ( 598067 ) on Tuesday June 03, 2003 @12:10PM (#6106251) Homepage
        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:Dell? (Score:2, Informative)

      by doinky ( 633328 )
      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? (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-

  • by stinky wizzleteats ( 552063 ) on Tuesday June 03, 2003 @11:30AM (#6105864) Homepage Journal

    "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."

    • Nice! :D

      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

      • 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?

      • 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).

        • 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

    • by 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 [lib.de.us].
    • While your equation is true remember that:
      Communism = (~innovation)&&(~democracy)&&(~freedom )
    • 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

  • Hmm... (Score:3, Funny)

    by GreyOrange ( 458961 ) on Tuesday June 03, 2003 @11:32AM (#6105879) Journal
    Well, the bigger they are the bigger they fall, unless they are so big that they fall upon themselves and recieve a cushioning effect.
  • by Tsali ( 594389 ) on Tuesday June 03, 2003 @11:33AM (#6105893)
    The long, icy reach of SCO.... curses!

    Oh wait? There is no conspiracy? Darn.
  • by Anonymous Coward on Tuesday June 03, 2003 @11:33AM (#6105896)
    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.
    • by 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
      • by 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 t

    • 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

  • by gpinzone ( 531794 ) on Tuesday June 03, 2003 @11:33AM (#6105897) Homepage Journal
    Simple...they made it by stealing IP from SCO! Case closed!
  • Asbestos Post (Score:4, Insightful)

    by Bame Flait ( 672982 ) on Tuesday June 03, 2003 @11:33AM (#6105898)
    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 (Score:2, Insightful)

      by Matrix272 ( 581458 )
      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, althou
      • 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:Asbestos Post (Score:2, Insightful)

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

      Reset and try again please.

  • Nothing new (Score:5, Interesting)

    by mao che minh ( 611166 ) * on Tuesday June 03, 2003 @11:35AM (#6105924) Journal
    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 (Score:3, Interesting)

      by bludstone ( 103539 )

      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.
  • by jj_johny ( 626460 ) on Tuesday June 03, 2003 @11:35AM (#6105927)
    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.
    • by Anonymous Coward on Tuesday June 03, 2003 @11:47AM (#6106043)
      Enron just shifted revenue too. Of course they shifted it from the far future using an accounting time machine. :-)
    • by milo_Gwalthny ( 203233 ) on Tuesday June 03, 2003 @11:51AM (#6106065)
      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.
      • by 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).
        • 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
        • "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.

      • 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 analys

      • by A nonymous Coward ( 7548 ) * on Tuesday June 03, 2003 @12:36PM (#6106513)
        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.
        • 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 com
      • 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 lef
    • 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?
  • Probably a non-issue (Score:4, Interesting)

    by Alizarin Erythrosin ( 457981 ) on Tuesday June 03, 2003 @11:36AM (#6105930)
    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?)
  • I doubt it's too bad (Score:4, Interesting)

    by gerf ( 532474 ) <edtgerf@gmail.com> on Tuesday June 03, 2003 @11:36AM (#6105937) Journal

    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

    • by Billly Gates ( 198444 ) on Tuesday June 03, 2003 @12:18PM (#6106305) Journal
      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.

      • 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.
  • So ? (Score:5, Insightful)

    by frodo from middle ea ( 602941 ) on Tuesday June 03, 2003 @11:39AM (#6105962) Homepage
    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 :-)
  • Resting (Score:2, Funny)

    by dubstop ( 136484 ) *
    Ted: That money was resting in my account.

    Dougal: Right. A good long rest.
  • Software (Score:5, Funny)

    by WPIDalamar ( 122110 ) on Tuesday June 03, 2003 @11:45AM (#6106030) Homepage

    Well you see... they've been selling free software, so how could they possible have any revenue from it?

    I bet if we look at their spending, there will be free software in there. No company would be dumb enough to sell free software, so that must be an accounting irregularity too!
  • Damn, and all my capital is tied up in bonds.

    By the time I can convert into IBM stock this will probably ahve blown over.

  • News for Nerds (Score:5, Insightful)

    by watzinaneihm ( 627119 ) on Tuesday June 03, 2003 @11:51AM (#6106075) Journal
    As a search on Google shows [google.com] 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 [slashdot.org] on slashdot
    Did Iraq have WMD?
  • No need for alarm (Score:5, Informative)

    by DangerousDee ( 446290 ) on Tuesday June 03, 2003 @11:51AM (#6106076) Homepage
    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 [marketwatch.com]. Either way, anyone that is shouting "Enron!" at this is either foolish, uninformed, or possibly both.
  • misleading (Score:3, Insightful)

    by egoff ( 636181 ) on Tuesday June 03, 2003 @11:51AM (#6106077)
    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.
  • Accounting... Big Blue...

    Big Red?


  • 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.]?

  • by SuperDuG ( 134989 ) <`be' `at' `eclec.tk'> on Tuesday June 03, 2003 @12:17PM (#6106299) Homepage Journal
    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.


  • Is it:
    1. ???
    2. Get investigated by SEC
    3. Profit!
    1. Profit!
    2. ???
    3. Get investigated by SEC
    Any insight?
  • by revividus ( 643168 ) <phil.crissman@gma[ ]com ['il.' in gap]> on Tuesday June 03, 2003 @12:29PM (#6106441) Homepage
    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.

  • by Pfhreakaz0id ( 82141 ) on Tuesday June 03, 2003 @12:35PM (#6106505)
    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?
    • 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
    • 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!
    • 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.....
  • by zptdooda ( 28851 ) <deanpjm@g m a il.com> on Tuesday June 03, 2003 @01:06PM (#6106772) Journal
    "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.

    • 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 equ
  • by DrSkwid ( 118965 ) on Tuesday June 03, 2003 @01:07PM (#6106778) Homepage Journal
    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 [edwinblack.com]

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

Karl's version of Parkinson's Law: Work expands to exceed the time alloted it.