MB and Mike:
Glad to see you two and a few of the others taking up arms about IBM's accounting. I raised a bunch of issues last quarter on the IBM forum and also with some of the press and received a blast for my troubles.
I suspect that Louis has a number of other interesting accounting activities on the go, but which are not easily proven. I find it interesting how his service revenues have increased just enough to take the sting out of decreasing revenues in maintenance, software, and hardware (all much higher margins, by the way). Sometimes a scam is detected by the degree of coincidence it provides. There is also plenty of room for IBM to play games in terms of how much revenue it choses to book in the early stages of its service contracts. As well, I wonder how many Y2K promises have been made in those service contracts? Certainly there are plenty of rumours around about this topic.
No matter how one cuts it, IBM has provided flat to down revenues and flat to down profits for many quarters now, yet the market is paying $115 today, when one could have bought plenty for less than $50. some eighteen months ago. Shareholder equity is in free fall as well, as Louis continues to borrow to buy back all that nice stock.
In the end, it will not go well for Louis. It's one thing to run an accounting scam in some OTC situation, but they will have a very public hanging on the back side of this one as every widow, orphan and lazy fund manager in the land owns it in spades. Can't wait.
Best, Earlie |
