NEW YORK (PRIMEZONE) - July 11, 2005 - MURRAY, FRANK & SAILER LLP filed a class action lawsuit on July 8, 2005 in the United States District Court for the Southern District of New York, on behalf of persons who purchased or otherwise acquired publicly traded securities of International Business Machines Corporation (“IBM” or the “Company”) (NYSE: IBM) between April 5, 2005 and April 15, 2005, inclusive, (the “Class Period”).  The lawsuit was filed against IBM and Samuel J. Palmisano, Mark Loughridge and Timothy S. Shaughnessy (“Defendants”).

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The complaint alleges that during the Class Period IBM and certain of the Company's executive officers issued materially false and misleading financial statements to the investing public regarding its financial performance and prospects in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b 5 promulgated thereunder.  Specifically, the complaint alleges that Defendants failed to disclose, despite having a duty to do so, that:

  • At the time of its analyst conference call on April 5, 2005, which was purportedly to discuss the impact of expensing options under SFAS 123R, the Company was experiencing significant operational issues in multiple areas of its business. In particular, the Company had been unable to close significant transactions late in the first quarter,it was experiencing elongated sales cycles, and was having product-transition problems in its hardware segment.
  • The Company intentionally accelerated the adoption of SFAS 123R, despite having an additional two quarters to implement it, in order to sufficiently lower analyst expectations so that when it later disclosed the operational issues and reported earnings from continuing operations of $0.85 per share for the first quarter 2005, it would have the effect of cushioning the blow of the significant earnings miss.
  • The Company intentionally misrepresented the impact from expensing options, indicating an earnings impact of $0.14 per share on April 5, 2005 (versus the actual impact of $0.10 per share reported on April 14, 2005), in order to disguise a significant and material operating miss.

On April 14, 2005, IBM reported first quarter 2005 financial results. The Company posted net income of $1.4 billion, or $0.84 per share, which represented an additional miss of $0.06 per share, undisclosed nine days earlier. The Company also revealed that the miss was significantly attributable to operations, rather than wholly attributable to SFAS 123R, as the Company had previously indicated.   Shares reacted negatively to the news, falling from $83.64 per share on April 14, 2005, to $76.70 per share on April 15, 2005. Before the markets opened on evening, April 18, 2005, the Wall Street Journal published an article characterizing IBM’s April 5, 2005 announcement as “clouding” IBM’s true financial position, and “cushioning the blow” of its earnings miss. On May 4, 2005, IBM announced that it would be reducing its workforce by 10,000 to 13,000 employees. On June 27, 2005, the Company announced that the SEC had begun an informal investigation into the Company’s statements regarding the earnings miss.

If you purchased or otherwise acquired IBM securities on any world exchange between April 5, 2005 and April 15, 2005, inclusive, and sustained damages, you may, no later than September 6, 2005, move the Court to serve as lead plaintiff. Shareholders outside the United States may also join the action, regardless of which exchange was used to purchase the securities. To serve as lead plaintiff, however, you must meet certain legal requirements. You can join this class action as lead plaintiff online at If you would like to discuss this action, this announcement, or your rights and interests, please contact plaintiff’s counsel Eric J. Belfi or Christopher Hinton of MURRAY, FRANK & SAILER LLP.

MURRAY, FRANK & SAILER LLP and its predecessor firms have devoted its practice to shareholder class actions and complex commercial litigation for more than fifteen years and have recovered hundreds of millions of dollars for shareholders in class actions throughout the United States.



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