Prudential keeps hold and cut the price target on IBM Corp. (IBM) to $100.
Analyst Kim Alexy says IBM believes the sale of intellectual property (in this case its optical transceiver business) is a normal part of business activity, and that it used customary accounting approach to this deal. She notes the treatment has PricewaterhouseCooper's (auditor) support. But even if IBM's accounting treatment is correct, Alexy says she questions whether IBM should have adhered to a higher standard of disclosure given the material impact of its deal -- IBM would have missed fourth-quarter EPS estimates if not for the gain on the sale. With an environment less tolerant of these types of concerns, and long standing concerns about IBM's EPS "engineering", Alexy expects IBM's multiple to compress.