IBM says agency investigating revenues; stock of No. 1 computer maker sinks after-hours.
June 2, 2003: 9:02 PM EDT
NEW YORK (CNN/Money) - IBM said Monday it is being investigated by the Securities and Exchange Commission regarding sales it booked in 2000 and 2001.
The world's biggest computer maker said the agency is examining revenue from customer transactions, adding it believes the probe arose from a separate investigation of a customer of an IBM unit that makes point-of-sale products for retailers.
A spokesman for International Business Machines Corp. said the company would cooperate fully with the SEC's investigation but would not name the customer. A spokesman for the SEC declined to comment.
Shares of IBM (IBM: Research, Estimates) tumbled 2.7 percent to $84.97 in after-hours trading, according to Island ECN, after Big Blue slipped 71 cents to $87.33 in regular trading Monday.
This is not the first time that IBM has come under SEC scrutiny.
The agency asked IBM to amend its 1999 annual report due to concerns about the way the company was accounting for gains from its pension fund, as well as asset sales. The matter was resolved and IBM did not restate its 1999 numbers.
And in April of 2002, following criticism of how IBM disclosed an asset sale to JDS Uniphase, the SEC announced a preliminary investigation of IBM's accounting but ended up taking no action.
"This is big news because it goes back to the old accounting scandals that have shaken investor confidence, starting with Enron," Burton Schlichter, senior market analyst with Lind-Waldock & Co., told Reuters.
IBM dominates the market for point-of-sale systems and its customers include major retailers in the United States, a number of which are being scrutinized by regulators for their accounting practices.
"This might prove to be a non issue and their claims to credibility might be intact, but it's out there and it's an overhang," said Marty Shagrin, an analyst at Cleveland-based Victory Capital, which owns IBM stock.
Armonk, N.Y.-based IBM ranked No. 8 on the latest Fortune 500 with sales of $83.1 billion last year.
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