Wednesday, June 4, 2003

Shares of IBM fall at news of SEC probe

The Associated Press

ARMONK, N.Y. - Shares of IBM Corp. fell 4 percent Tuesday after the company disclosed that the Securities and Exchange Commission is investigating how the technology giant booked revenue in 2000 and 2001.

IBM said after the close of trading Monday that it had received a notice of a formal SEC investigation primarily concerning "certain types of customer transactions."

Spokesmen for IBM declined to elaborate.

The company said it thinks the probe arose from a separate SEC investigation into a customer of IBM's retail store solutions unit, which sells cash registers and other checkout-counter computing equipment.

SEC spokesman John Heine declined to comment.

IBM shares lost $3.51 to close at $83.82 in trading Tuesday on the New York Stock Exchange.

The SEC has questioned IBM's accounting a few times in recent years.

In 2002, the agency opened an inquiry into how IBM accounted for income it got from the sale of a business to communications equipment manufacturer JDS Uniphase Corp.

The SEC closed that investigation without taking any action.

Sandy Maris, a corporate lawyer with Jenkens & Gilchrist in Dallas, said it was difficult to tell how much of a cloud the investigation poses for IBM, which reported $81 billion in revenue last year.

Since the probe apparently stemmed from an existing investigation, "it's not as casual, perhaps, as somebody calling up the SEC and saying, 'I think there's something bad going on at IBM,' " Maris said.

But he added that in today's post-Enron and WorldCom environment, the SEC is chasing down more potential accounting irregularities than ever.

"It could be easily related to one customer relationship, not even a whole division," Maris said.

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