IBM Pledges To Expand Financial Reporting

Shareholders and analysts can expect a more complete picture of IBM's financial performance next month when the company releases its results for 2001, a company spokesman says. "Our shareholders have been asking for more detailed information, and we're going to give it to them," the spokesman says. IBM says the changes are not a direct result of the Enron Corp. accounting scandal. The company, however, has been among those recently criticized by increasingly vigilant investors for not detailing significant financial transactions on its income statements.

Confirming information contained in a report in Tuesday's Wall Street Journal, the spokesman said IBM will, among other things, provide investors with more detailed information about income from sales of intellectual property and how that's used to offset operating expenses. That has become an issue for the company as some analysts are saying IBM shouldn't have used a $300 million gain from the sale last month of its optical transceiver business to JDS Uniphase Corp. to offset fourth-quarter expenses. Under the deal, IBM received $100 million in cash from JDS Uniphase and 26.9 million shares of company stock. With JDS Uniphase shares now trading at less than $6 per share, down almost 50% since early December, IBM's take from the deal now stands at less than $200 million. IBM stands to gain $85 million in additional cash or stock from JDS Uniphase next year, depending on how the business performs.

Critics say that using such income to offset expenses instead of reporting it as revenue makes IBM look more efficient that it may actually be. "Their approach may technically meet generally accepted accounting principles, but it doesn't make much sense from an accounting standpoint, and makes it hard for firms like ours to compare their results to the competition," says Bob Sutherland, a Technology Business Research analyst.

In midafternoon trading Tuesday, IBM's stock was down $3.59, to $99.30.