ALL BUSINESS: IBM's Conference Falls Short On Questions

the sale of its PC business

Too bad the only discussion was a scripted back-and-forth between two IBM executives. No real questions were taken in that public forum.

Not that IBM's decision to promote the news in a one-way webcast violates securities laws, but it sure isn't the kind of thing you would expect to see from a company behind one of the most widely held stocks in the world.

It was late Tuesday in the United States and early Wednesday in China when it was announced that Lenovo Group Ltd. had agreed to acquire a majority stake in IBM's personal computer business for $1.25 billion in cash and stock, in one of the biggest Chinese overseas acquisitions ever.

The deal would make Lenovo the third-largest PC company in the world, with an estimated 8 percent share of the worldwide market and combined revenues of $12 billion. As part of the transaction, which is expected to close in the second quarter of next year, IBM will hold an 18.9 percent stake in Lenovo.

Sponsored post

It marks the end of an era for IBM, which introduced the first PC in 1981 and was the market leader until a decade ago when it began to lose ground to hardware companies like Dell Computer and software giant Microsoft.

As many companies do when they have a major announcement, IBM said it would talk about the acquisition with the media, Wall Street analysts and investors.

And its Internet-broadcast event began as most typically do. Patricia Murphy, IBM's vice president of investor relations, introduced CFO Mark Loughridge, who then spent the next few minutes describing the financial structure of the deal and the strategic rationale for doing it.

In the traditional conference call, this would be followed by questions from the audience, as IBM routinely does in its quarterly earnings calls. This time, how IBM dealt with the issue of questions is questionable.

It didn't hold a real conference call _ in which Wall Street analysts ask questions and executives give answers. It just borrowed the format: Loughridge was asked six questions by Murphy that, he said, ``may be on your mind.'' Then he answered them.

After that, it was over.

In fairness, some of the questions that IBM presented could have been similar to those that audience members might have asked. On that list: What would be the implication of the deal on the cost leverage that IBM has with suppliers? Is IBM leaving the consumer home market?

But that's not the point.

It shouldn't be up to the spinners at IBM to determine what the audience deems to be the important issues to raise. And even after the company presented its own list of questions, why didn't it then go on to open up the floor?

That couldn't happen, though, because IBM totally cut off the possibility of hearing from anyone outside the company by using a listen-only webcast format.

In IBM's quarterly earnings discussions, analysts can ask questions via a telephone call-in. Those questions and answers, along with the entire corporate presentation, are broadcast in a webcast for anyone to watch.

IBM spokesman Clint Roswell said the "uncertainty of the time" is why IBM handled this situation as it did. The webcast took place at 9:15 p.m. EST Tuesday, which is later than most calls do. Yet in the same breath he talked about the "magnitude" of this deal and the importance of talking about it with the investment community.

The company is quick to point out that the webcast went above and beyond what it is required to do under securities laws. It also says that it took individual phone calls from analysts, investors and journalists well into the night.

Still, who knows what else could have come up had IBM allowed questions, and didn't everyone deserve to hear the answers? A bit of information here and there could have helped someone out there better understand the deal.

And chances are the reaction would have been positive, given the way analysts praised the deal and investors sent the stock higher the following day.

Conference calls are a rare opportunity for the investment community to have an interactive dialogue in a public forum with company officials. In an era where corporate wrongdoing has become so rampant, we can't afford to let companies set the agenda.

Let's hope that this was a one-time misstep for IBM, not business as usual going forward.

For full coverage of the deal, see CRN.

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