IBM Recovers After SEC Takes No Action in Probe

The Securities and Exchange Commission acknowledged a brief inquiry that closed this spring without any action.

Author:: Ronna Abramson
Publish date:: Apr 11, 2002 5:56 PM EDT

Updated from 5:26 p.m. EDT

Shares of

IBM

(IBM) - Get Report

began to rebound from a 52-week low Thursday after the

Securities and Exchange Commission

said it had closed a preliminary investigation of the company without taking action.

After reports of a preliminary inquiry into Big Blue pushed the stock to its 52-week low, the SEC took the unusual move of issuing a statement saying the investigation is closed.

"Regarding the reports of a preliminary inquiry by the SEC into IBM, the SEC staff opened an inquiry and closed it without action shortly thereafter," a spokesman for the agency said.

Shares of IBM were at $87.77 in after-hours trading. Shares fell as low as $83.34 during regular trading and closed down $4.82, or 5.4%, to close at $84.19.

The comment from the SEC, whose usual policy is to not comment on investigations, followed a report from Plymouth, Minn.-based

SEC Insight

that said the SEC, in a letter dated April 4, stated that it launched a preliminary inquiry Feb. 15, two days after a long-running investigation of the company ended. No termination date was given, suggesting the inquiry is still open and potentially unresolved,

SEC Insight

said in an alert to clients Thursday.

The SEC watchdog firm said it appeared that the new probe is tied to a Feb. 15

New York Times

article about IBM failing to disclose the sale of an optical transceiver unit in its fourth-quarter report, which boosted earnings. The company took heat for not disclosing exactly how it factored in the $280 million it gained from the Dec. 19 sale of its transceiver unit to

JDS Uniphase

(JDSU)

The new inquiry appeared to be unrelated to an investigation centered on alleged bribery involving IBM employees in Argentina, resolved Feb. 13.

IBM spokeswoman Carol Makovich declined to comment on the

SEC Insight

note. "We do not comment on rumors and do not as part of our policy comment on relationships with government agencies," she said. A spokesperson for the SEC said that as a matter of policy he was not authorized to deny or confirm the existence of any investigation.

Shares of Big Blue were already off this week after the company said Monday it plans to miss Wall Street's first-quarter projections by $1.1 billion to $1.3 billion and lowered earnings hopes by 18% to 22%. Shares have tanked 13.6% from Friday's close of $97.25.

Morningstar analyst Joe Beaulieu said he believes the market overreacted to the rumblings of an SEC inquiry, in part because investors are jittery from the warning earlier this week. "I think having skated through the downturn pretty easily IBM had this aura of invincibility around it, and now that that has been shattered," said Beaulieu, who temporarily suspended coverage until IBM releases full financial disclosures for the quarter. "I think the company is basically being tarred with the rest of the tech group."