IBM Facing SEC Probe

    June 28, 2005
    WebProNews Staff

Questions about the technology company’s first quarter numbers have triggered an investigation by the SEC.

On Monday, IBM received the kind of request that businesses loathe. The Securities and Exchange Commission has asked IBM to voluntarily comply with an informal investigation.

At issue is the company’s first quarter earnings and its expensing of equity compensation. At this time, the SEC has informed IBM that the informal investigation does not indicate any violations of the law have occurred.

IBM made a change in how it treats stock options. In a note to analysts, IBM said it would begin treating stock options as an expense. That change would impact the company’s first quarter earnings.

A week before announcing its first quarter numbers, IBM asked analysts to lower their target estimates from $1.04 per share to 90 cents. But IBM missed that target as well, declaring earnings of 84 cents per share instead.

“We have no reason to believe at this time that the accuracy of our reported earnings is at issue,” said Edward Barbini, a spokesman for IBM.

The SEC may be questioning IBM on whether it misled analysts into lowering their estimates, in order to soften the market impact of a lower earnings report. Analysts who expected the expense of stock options to be 14 cents per share found out it was 10 cents instead.

David Utter is a staff writer for WebProNews covering technology and business. Email him here.