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    Highlights for week ending February 23, 2002
  • F***edCompany.com: "You have been selected for permanent layoff," according to this memo sent to a s***load of IBM employees today. Also in the memo are the ages and titles of affected employees." (Editor's note: The name and URL of the site linked to in this item includes an obscenity).
  • The Motley Fool: IBM's Accounting Tricks. Excerpt: "I first warned investors about IBM in January 2000, highlighted last May how the company's overly aggressive pension-fund accounting was inflating earnings, and only a month ago, wrote that IBM 'recently reported fourth-quarter sales that were lower than those five years ago. With no growth whatsoever in the top line, and the bottom line only up slightly (due primarily to lower taxes and various accounting gimmicks), is IBM really worth nearly triple the price it was back then? I think not.' Lou Gerstner deserves credit for turning IBM around in the early and mid-1990s, but over the past few years, in my opinion, his main accomplishment has been creating the appearance of robust growth, despite the company's stagnating business, with all sorts of creative accounting tricks -- most likely legal ones, to be sure, but tricks nevertheless. I predict that these shenanigans will come to light, the stock will suffer -- and so will Gerstner's legacy."

  • Reuters: IBM Shares Fall, Accounting Concerns Stick. Excerpt: "IBM, which has been criticized for years for not providing more information with its quarterly earnings report, said it changed its policy to meet requests by investors and analysts. The changes were reported in the Wall Street Journal on Tuesday, just days after a New York Times story on the issue. The New York Times reported on Feb. 15 that IBM hadn't given investors enough details about the effect on earnings of a $300 million gain the company booked when it sold an optical unit to JDS Uniphase in late December."

  • New York Post: Gotcha! Everyone Wants to Catch IBM Red-Handed. Excerpts: "On Jan. 22, my second entry in the contest was the fact that IBM has been keeping its per-share profits looking good by a simple trick - the exuberant repurchase of outstanding shares. Correct, but this was admittedly a weak effort on my part." ... "I predict that the next accounting problem for IBM will be its handling of the sale (or whatever the transaction was) of its personal computer manufacturing business. IBM is refusing to say much about the deal until it reports first-quarter earnings."

  • CNBC: Three companies whose accounting I trust. Excerpts: "It's one thing to discover that the cowboys who ran Enron and Global Crossing first bent and then broke the rules. But now, IBM stands accused, and that's another matter. If investors can't trust IBM's books, then whose accounting can they trust?" ... "In recent years, the company has used bull-market gains in the value of its employee pension fund to help keep earnings per share climbing steadily. The company booked more than $1 billion in savings from that source in 2000. Treating that as regular 'cost cutting' strikes me as deceptive -- since a bear market in stocks could easily turn that plus to a minus."

  • On February 21, Janet Krueger testified at a HELP Senate committee meeting held by Senator Wellstone in St. Paul. Excerpt: "I would like to remind you that thousands of employees in this country have lost significant portions of both their promised pensions and promised retiree medical coverage, long before their employers filed for bankruptcy. In fact, companies like IBM, with massive surpluses in their pension funds, are slashing and withholding employee benefits seemingly only so they can pad their quarterly earnings reports and generate higher bonuses for the executives. IBM failed to grant retirees COLAs during the 90s when the returns on their pension funds were soaring. IBM is now charging high health insurance premiums to retirees who were promised life-time non-contributory benefits when they left the company; some of our IBM retirees now receive monthly health care premium bills in place of their pension checks! And IBM drastically reduced promised pensions for active employees through cash balance conversions. Clearly, Congress needs to focus on what corporations are doing with their pension plans LONG before they file for bankruptcy." Read Ms. Krueger's complete testimony... Part two...

  • Yahoo! Finance: IBM to Provide More Details on Earnings. Excerpt: "The increased disclosure comes amid heightened interest in the quality of earnings reports in the wake of accounting issues at energy company Enron Corp. IBM came under scrutiny after a New York Times report on Friday noted that the company did not reveal details of a gain from the sale of a unit it had booked as intellectual property revenue."

  • "criminalize_earned_benefit_theft" comments on the situation future IBM retirees will face with their "Future Health Accounts." Excerpt: "Retiring from IBM in your 50's will become the exception, rather than the rule. It will be unaffordable. Lou will be living high on the hog (with his 1.14 million in lifetime retirement pay, and lifetime medical benefits, and unlimited access to the corp aircraft fleet) and laughing at all the people whose lives he touched while he earned millions by counting our pension surpluses as 'earnings'. Amazing."

  • Jamshyd Taylor outlines what new IBM CEO Sam Palmisano must do to restore trust in IBM by its investors, customers, and employees. Part 2. Excerpt: "As IBMers, investors, and customers lost trust in IBM, they couldn't help but notice who profited. Executives can profit from a company in two ways - build and grow the company into an undeniable success, or strip the company of its heritage and assets while looting the remains. Which track did Lou and his minions choose? While employees were robbed of promised benfits, while investors were misled with less than accurate financial statements and the manipulation of the stock price, and while customers suffered through ever decreasing support, expertise, and innovation, Lou and his henchmen rewarded themselves with bonuses built on vapor profits, lifetime medical and retirement security, and millions of dollars in stock options. These mercenaries, most of whom spent less than 10 years with the company, looted the reputation and assets of IBM with impunity, while destroying the lives of thousands of IBMers with 20, 30, and even 40 years of service to the company."

  • Poughkeepsie Journal: IBM requests IRS approval on pension plan. Excerpt: "IBM Corp. has asked the Internal Revenue Service to OK its 1999 cash-balance pension plan. The plan reduced pension benefits to some employees. It also sparked a controversy that led to Congressional hearings and a class-action lawsuit alleging age bias in federal court, brought on behalf of about 140,000 IBMers." If link is broken, view Adobe Acrobat version [PDF--78KB].

  • Michel Perraud reports how French and other European IBMers are being forced out of the company.
"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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