SEC Opens Formal Probe Into IBM Earnings - InformationWeek
05:31 PM

SEC Opens Formal Probe Into IBM Earnings

The Securities and Exchange Commission is investigating the tech giant's disclosures relating to its first-quarter 2005 earnings and expensing of stock options.

IBM on Thursday said the Securities and Exchange Commission has opened a formal investigation of the tech giant's disclosures relating to its first-quarter 2005 earnings and expensing of stock options.

In a short statement, the Armonk, N.Y., company said it has been told by the SEC "that the investigation should not be construed as an indication that any violations of law have occurred."

IBM said it has been cooperating with the SEC since the beginning of an informal investigation into the matter. The informal probe was disclosed by IBM in June 2005.

At that time, IBM said the federal agency was looking at how the company disclosed information about its plan to treat stock options as an expense on its first-quarter income statement.

Before the April 26 earnings report, IBM had suggested to Wall Street analysts that stock-option expenses would reduce earnings by about 14 cents a share. When the actual number turned out to be only 10 cents a share, a number of analysts complained that they were misled into publishing a low estimate.

As a result of disclosing the higher number, IBM fell 7 percent short of revised estimates of 90 cents per share, as opposed to 12 percent, if analysts had used the true stock-options expense of 10 cents a share.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
2017 State of IT Report
2017 State of IT Report
In today's technology-driven world, "innovation" has become a basic expectation. IT leaders are tasked with making technical magic, improving customer experience, and boosting the bottom line -- yet often without any increase to the IT budget. How are organizations striking the balance between new initiatives and cost control? Download our report to learn about the biggest challenges and how savvy IT executives are overcoming them.
Register for InformationWeek Newsletters
White Papers
Current Issue
Top IT Trends for 2018
As we enter a new year of technology planning, find out about the hot technologies organizations are using to advance their businesses and where the experts say IT is heading.
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll