Investors in IBM should brace for a period of anemic performance from its stock while the cloud of a regulatory probe hangs over the world’s largest computer company, fund managers said on Tuesday.
While no one expects the probe to be so wide-ranging that it compromises IBM’s underlying business, the company may face a big challenge in rebuilding investor confidence.
Shares of International Business Machines Corp.’s IBM.N fell about 4-1/2 percent on Tuesday, weighing on the Dow Jones industrial average.
“IBM could be an underperformer in the market for a while,” said Timothy Stives, managing director and portfolio manager at Ashland Management, which does not own IBM shares.
However, many experts have yet to find a real skeleton in the closet of the Armonk, New York company.
“Most investors will generally give IBM the benefit of the doubt given its increasing transparency and its relatively strong fundamentals,” said Goldman Sachs analyst Laura Conigliaro. “If anything, (the news) could take the stock down by another couple of points.”
IBM late on Monday said the U.S. Securities and Exchange Commission launched a formal inquiry into how the company booked some revenue in 2000 and 2001.
It said the probe was sparked by a separate SEC probe of a customer of its Retail Store Solutions unit, which sells electronic cash registers and other point-of-sale products.