Shares in IBM slipped below the $100 mark yesterday for the first time since mid-October in the wake of questions about its accounting methods.
The fall to $99.54 started on Friday when Big Blue dropped $5 to $102.89 after the New York Times reported that the company's latest quarterly report used non-standard accounting methods regarding the sale of its optical transceiver business to JDS Uniphase, which generated $300m.
Accounting is a sensitive business at the moment following the Enron collapse.
The report claimed that IBM "did not provide details of the sale of a business unit to lower its operating costs to investors or account for it as a one-time gain, as is the practice". Instead the company reported it as intellectual sale profits.
The report also quoted analysts as saying that using the gain to offset expenses, taking into account IBM's tax rate, could have boosted earnings by as much as 12 cents a share.
Investors had the President's Day holiday on Monday to consider the news but were still unhappy on Tuesday and sent the price down another $3.35.
John Joyce, IBM's chief financial officer, responded immediately to insist that the company would start disclosing more details about such transactions.
Joyce explained that the disclosures will be included in IBM's annual report to the Securities and Exchange Commission, which is due to be filed next month.
Big Blue's financial disclosure changes will include releasing information on intellectual property income; the impact of gains and losses from its investments in other companies; gains on sales of real estate; the effect of amortisation of goodwill from acquisitions; and the impact of income from IBM's over-funded pension plan.
IBM, the latest company to respond to increased investor concern over accounting practices, has been criticised for using income from such items as sales of intellectual property and pension fund gains to reduce its reported costs.
Merrill Lynch analyst Steven Milunovich said that he believed IBM's treatment of the income was consistent with its past practice, but he added: "The company could have done more to call out the magnitude of the transaction."
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