By Ashley Vance in Mountain View for The
Register.
This article has been reproduced with permission.
IBM today revealed that the SEC had upgraded from "informal" to
"formal" its investigation into how IBM disclosed its expensing of
stock options. The informal probe arrived
last June, as the government examined an unusually large
discrepancy between IBM's first quarter figures and the financial
analysts' forecasts.
Following IBM's first quarter earnings miss in April 2005,
Sanford Bernstein's analyst Toni Sacconaghi explained his take on
the issue saying,
"EPS including options expense was $0.85;
ex-options, EPS was $0.95, a nine cent miss vs. consensus estimates
($1.04) prior to last week, when IBM told analysts to lower
estimates $0.14 due to options expense. We note that IBM’s
guide-down of earnings by $0.14 last week did not reflect the true
expected cost of options in the quarter of $0.10."
A number of analysts noted that IBM seemed to indicate that
expensing options would have a larger impact on its first quarter
performance than it actually did. The SEC took notice as well.
"As previously disclosed in June 2005, IBM has been cooperating
with the SEC in an informal investigation of this matter, and will
continue to do so," IBM said. "The SEC has informed IBM that the
investigation should not be construed as an indication that any
violations of law have occurred."
Shares of IBM barely moved on the day, dropping just 60 cents to
$83.57. Investors appeared unmoved by the formality of the SEC's
probe.
© The Register
2006
