IBM Tumbles After Disclosing SEC Investigation Into Its Revenue Recognition

Tyler Durden's picture

Earlier today, ahead of the filing of its 10-Q, IBM provided what it thought would be an unexpected if welcome present to shareholders when it announced that the board authorized $4 billion in additional funds for use in the company’s stock repurchase program. "This amount is in addition to approximately $2.4 billion remaining at the end of September 2015 from a prior authorization. With this new authorization, IBM will have approximately $6.4 billion for its stock repurchase program."

Oddly enough, the stock not only did not rise, it fell, making some wonder if there was some Easter egg about to be announced in the company's 10-Q. 

There was, and it was the following:

In August 2015, IBM learned that the SEC is conducting an investigation relating to revenue recognition with respect to the accounting treatment of certain transactions in the U.S., U.K. and Ireland. The company is cooperating with the SEC in this matter.

While hardly suggesting another valeant has emerged, having a regulator focus on a company which has run out of buyback dry powder and whose revenues are the lowest they have been in over a decade, was hardly what the shareholders expected.

The stock, now well below Warren Buffet's cost basis, did not like it and promptly tumbled once it hit the wires.

The good news, for IBM, is that now it has an even lower price at which to execute its buybacks - the stock has tumbled to levels not seen since October 2010.

And is breaking a key support level back to 1999...

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NoDebt's picture

I was working at Xerox when they went through this same thing in the late 90s- recognizing multi-year contract revenue all in year 1.  Bad Juju.  

GET away and STAY away from IBM.  Nothing good happens after the phrase "accounting irregularities" is uttered.

nope-1004's picture

Carly Fiorina or Meg Whitman would turn this company around.  You know, FASB accounting gimmickery aside, it takes "real leadership to produce real growth".


pods's picture

Just as long as you don't look at the banks......................

CheapBastard's picture
UPS Falls Most in Two Months as Volume Drop Damps Sales


But volume always drops during the holidays...



... oh, wait a sec ....

SERReal1's picture

Shipping volume has nothing to do with how healthy the economy is. Just look as how good the Transports are doing.


Oh wait.....

Tijuana Donkey Show's picture

Everyone knows that the Chinese economy is a good indicator of how the US is doing. The Chinese are killing it, right?

Grandad Grumps's picture

Why IBM and why not Netflix and LinkedIn?

NoDebt's picture

Because they never had any profit to recognize in the first place.

Gambit's picture

+1000 Hahahah! Thanks for the laugh NoDebt!

Navymugsy's picture

They were the CIA's first big IPO.

_ConanTheLibertarian_'s picture
IBM Tumbles After Disclosing SEC Investigation Into Its Revenue Recongition

They should start a Zero Hedge spelling investigation.

pods's picture

IBM should make the SEC deal with Watson directly.

Could you imagine the hard-ons the inspectors would get thinking about all the computing power at their disposal.

Long Kleenex and hand lotion.


Id fight Gandhi's picture

Sloppy... They forgot to buy them off?

Sudden Debt's picture



MadVladtheconquerer's picture
MadVladtheconquerer (not verified) Oct 27, 2015 1:01 PM

John Cougar Mellonhead said it best:




BlindMonkey's picture

How about this one.


Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you is worth savin’
Then you better start swimmin’ or you’ll sink like a stone
For the times they are a-changin’

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won’t come again
And don’t speak too soon
For the wheel’s still in spin
And there’s no tellin’ who that it’s namin’
For the loser now will be later to win
For the times they are a-changin’

Come senators, congressmen
Please heed the call
Don’t stand in the doorway
Don’t block up the hall
For he that gets hurt
Will be he who has stalled
There’s a battle outside and it is ragin’
It’ll soon shake your windows and rattle your walls
For the times they are a-changin’

Come mothers and fathers
Throughout the land
And don’t criticize
What you can’t understand
Your sons and your daughters
Are beyond your command
Your old road is rapidly agin’
Please get out of the new one if you can’t lend your hand
For the times they are a-changin’

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is rapidly fadin’
And the first one now will later be last
For the times they are a-changin’

Read more:

Falling Down's picture


I'll bet this is just the beginning. More companies will come clean about their books, as the economy takes a dump. Better to just wring it out, and be done with it, stock market be damned.

Temporalist's picture

Don't hold your breath expecting companies to tell the truth.  Nobody goes to jail for fraud anymore anyway.

Omega_Man's picture

Is there anything in the USA that is NOT a FRAUD???

NoDebt's picture

In my ~50 years experience in the place, no.  It's pretty much all fraud from top to bottom.  Show me any person or company that you consider "successful" and you've pretty much simultaneously identifed the most fraudulent as well.

Rodders75's picture

Surely not Uncle Warren 

The Chief's picture

The problem is that the market has become like the ugly girl on the troop ship....its the only game in town.

silverer's picture

Good grief!  Did you have to post that?  LMAO

Rainman's picture

It must be really bad when the SEC gets off its lazy corrupt ass to investigate anything.

Hundreds of revenue recognition scams to choose from.

BlindMonkey's picture

Just wait until pornhub becomes publicly traded.  They will do lots of investigating.

aliki's picture

don't bet against stan & chanos being on the same side is the lesson here

on another note, uncle warren might be seeing that todd & ted have an "accident"

Banker Buster's picture

Buffett call Obama and get this thing on the up and up.  I'm sure the phone is already nice and warm from "the crony" working his connections in the government.  Then he'll come out in public in a few weeks once IBM has doubled in price and talk about what a great investor he is and how investing is easy as long as you invest in good companies.  

freedogger's picture

Not to mention, my buddy working beside me on the project that is offshoring my job to India with IBM just put in his two weeks notice as he finally saw the light that this was a futile hopless never too succeed sure to go up in flames endeavour!!!

Once this hits the wire, watch out below. You can thank me later.

Kaiser Sousa's picture

"what's all the fuss about?? trust us everything is fine...."



Ness.'s picture

IBM - the fourth largest component of the DOW discloses a SEC investigation into fraudulant revenue accounting and the DOW doesn't budge.  Thank you PPT - you're our only hope.



buzzsaw99's picture

well at least warren has that rock solid dividend to look forward to. /s

Bangin7GramRocks's picture

Big Blue will remember this investigation and $3 million fine for a looooong time. Just kidding!

SillySalesmanQuestion's picture

Bookcooking, first rule of a fraud perpetuated by organized criminals, particularly white collar criminals.
Skimming the profits are the second rule. Stock buybacks are just a sophisticated form of the Skim.
The formation of dummy corporations are the third rule. The more you have, the more bookcooking you can do. Plus, you now have places to stash the cash, especially overseas.
Laundering the money is the fourth rule. You need a friendly banker to accomplish this, but there are no shortage of them who will do it for a fee.
The money launderer must not get greedy though, or they will be suicided and or terminated.

max2205's picture

DNC will be getting a big fat check soon.

So will the Hitlery charitable foundation.

Colonel Klink's picture

Couldn't happen to a nicer fortune 500 company.  Prosecute and lock up the Executives.

silverer's picture

Nah. Free college for their kids and double paid vacations.

silverer's picture

Everybody's doin' it, doin' it, doin' it,

Fudging their numbers and screwin' it, screwin' it.

MopWater's picture

Wonder who was shorting IBM hard?

DarthVaderMentor's picture

The ghost of the whistleblower Jerry Churchhouse and his IBM accounting irregularity accusations has reared its ugly head again, just like it did near the end of the Akers regime.

This isn't the first investigation that will eventually be whitewashed. 

nakki's picture

It would be nice to know how the banks would fare in a revenue recognition environment  but that would include auditing the FED, bringing back mark to market and finding out what's really on their books. Don't worry that will never happen. We all know GM, Microsoft, (counting those windows 10 sales that might happen) and every other company listed in the S&P pull sales forward and counts them as current revenue. 

Next we could find out how much of the book spending affects the US deficit.

Enron was just a decade before its time. 

Free John Corzine.

MedicalQuack's picture

Well in case folks forgot, the computer scientist that created IBM Watson left almost 2 years ago and now works at a Hedge Fund, so what did he know that we don't?

You never hear what IBM Watson is doing at Citi Bank with their Watson install over there, maybe cognitive technology to predict which consumers won't notice a few extra fees tacked on?  I say that because when the big fines came down on credit card fees, hardly any consumers had complained, but fees were big?  What do you think?