SEC steps up probe of IBM

BOSTON -- Federal investigators have stepped up their probe of how IBM Corp. advised Wall Street about stock option expenses in the first quarter of 2005.

The Securities and Exchange Commission had opened an informal investigation last June, but yesterday Armonk, N.Y.-based IBM said the agency told the firm this week the probe is now formal.

The investigation surrounds the guidance IBM gave before its first-quarter earnings, which were released last April 14.

At the time, the company said stock options cut into earnings by 10 cents per share. But analysts had been expecting 14 cents a share, a figure that Mark Loughridge, IBM's chief financial officer, gave in a chart accompanying an April 5 conference call. Loughridge was disclosing what options costs would have been a year earlier if IBM had been expensing stock compensation at the time. He indicated the first quarter of 2005 would yield a similar result.

IBM posted a disappointing first quarter, missing analysts' expectations by 6 cents per share.