y aren't even real. They are *imaginary*, as in IBM counts them as part of earnings, but they aren't spendable or taxable at all.
The concept of vapor profits is not new; it has been explained in multiple publications, including the Wall Street Journal; let me know if you need the references AGAIN.
I'm using the $896 number, because it is the one labelled "Net Periodic Pension (Income)/Loss" -- this is the line that reflects projected gains from the pension fund, which is an IRREVOCABLE trust for the plan participants.
I'm not using the $530, because the $356 cost of defined contribution plans is REAL money that gets deducted from pre-tax income.
As stated before, I stand by my numbers...
Dance, dance, it won't change the games IBM played in the annual report.
Btw, before you attack my assertion that these vapor earnings are imaginary, you might wonder how IBM managed to increase the amount of vapor profits, when the reported surplus in the pension fund went down from $17 billion to $11 billion... It's all part of the accounting games they played! They knew what they needed in vapor profits to get the expected level of earnings per share, even though the value of assets went down because of the poor showings in the stock market, so they used simple algebra. If you look at the table with the actuarial assumptions on the bottom of the page, you'll see that they reduced the discount rate by half a percent and increased the expected return on investments by half a percent, which let them project the needed amount of vapor profit!
So you see, I'm not the one playing games with the numbers, I'm only reporting on them...
Do you seriously think IBM actually believes they will get a record high 10% return on the assets in the pension fund this year, even though they've never assumed more than 9.5% before??? Either they've got a MUCH higher confidence in George's tax cut than I do, or they simply did what they needed to do to increase earned income by 11% to meet the street's expectations...
I agree, the real IBM story overseas is about corporate taxes, transfer pricing and its associated liabilities. Pensions are a minor problem there.
Do you know if IBM has finally tallied up and completed the UK tax investigation? They had a press release saying it was ongoing a few years back but no one seems to know when it will be completed and the results stated to shareholders?
It was all over the newspapers. This is proof that you only read what you want to. 132 people were charged in the largest SEC bust. It was around the may timeframe of 2000 (give or take a month). Here is another article you might enjoy.
This one is Union Corruption. There have been several articles regarding this subject.
Not exactly. The business conditions under which investors made those decisions last year may be no longer relevant.
Investors have now had over a year to review the proposal and it's implications. They may now have a different outlook on the proposal.
The investors who voted last year may not have IBM stock in their portfolios any longer.
Last year, the New York State Common Retirement Fund announced it would vote its 5.7 million shares in support of the resolution. Other institutional investors and advisers who supported the resolution included Calpers, the California state employee retirement system; the founder and former chairman of the Vanguard Funds; the Oregon state fund and a number of jointly managed Taft-Hartley funds. In a press conference early in 2000 Calpers president William Crist told a news conference "Calpers supports the resolution because withdrawing promised benefits for any employee is not only morally reprehensible, it's plain bad business." Like IEBAC, many organizations and reporters believe it is WRONG for companies like IBM to mislead investers into think earnings are higher than they really are by manipulating pension funds!
A big block of support came from ISS, Institutional Shareholder Services, at www.iss.cda.com, and Proxy Monitor at www.theproxymonitor.com; both are proxy advice services that advise the large mutual fund owners on how to vote the proxies for large corporations. Both companies issued advisories to all of their clients suggesting they vote for resolution #5.
Following is ISS advisory:
We understand the company's need to attract and retain qualified personnel through the use of the most competitive and up to date benefit packages available. Furthermore, IBM's old plan with its generous early retirement option was not in the company's best interests. The company has undergone a substantial effort to insure that its new retirement plan is in line with those offered by its competitors. However, we have reservations about the manner in which the new plan was implemented. Employees were not presented with the opportunity to provide input regarding what provisions they would like to have under a new plan. The proponents have stated that if IBM had simply terminated the plan and moved solely to a 401(k) plan, they would not have filed this proposal. Moreover, the cut-offs for continued participation in the old plan were based upon age, denying employees the opportunity to choose between the old plan and the new plan. As a result of the negative sentiment, the company expanded the group of employees who could choose between the old and new plans. However, this was not well received because the expanded group was not offered eligibility to participate in the old medical plan. The questionable manner in which the company has implemented the new plan has caused such a public outcry that a Senate hearing has been scheduled in response to the growing criticism.
Although the new plan is expected to boost the company's bottom line, any reported gains in net income as a result of this new plan will be due to the accounting treatment of the plan's current surplus and not from any real increase in the company's operating income. While increases in earnings usually help to boost shareholder returns, the market rarely responds positively to earnings increases that arise from accounting requirements. Furthermore, the Wall Street Journal has discussed this issue in detail so investors are well aware that these accounting profits are not real earnings.
Although we do not entirely agree with the broad wording of the proponents' resolution, we do agree with its overall spirit and intention. The unveiling of the new plan has resulted in negative public sentiment and poor employee morale which, in our opinion, could have a material adverse effect on the company. We believe these potential adverse effects outweigh any gains that the company may recognize on paper as a result of the new retirement plan.
We recommend a vote FOR Item 5.
This year, the proposal to give all employees a pension choice is #4 - Please vote YES!
IEBAC (IBM Employees Benefit Action Coalition)
507 529 8777 ext 110