On January 19, 1988, IBM reported greatly increased earnings for the fourth quarter of 1987. Despite this reported gain in earnings, the price of IBM's stock on the New York Stock Exchange declined by $6 per share to $111.75. In sympathy with this move, most other technology stocks also declined.15 IBM's fourth-quarter net earnings rose from $1.39 billion, or $2.28 a share, to $2.08 billion, or $3.47 a share, an increase of 49.6 percent and 52.2 percent over the same period a year earlier.

Management declared that these results demonstrated the effectiveness of IBM's efforts to become more competitive and that, despite the economic uncertainties of 1988, the company was planning for growth. The apparent cause of the stock price decline was that the huge increase in income could be traced to nonrecurring gains. Investment analysts pointed out that IBM's high earnings stemmed primarily from such factors as a lower tax rate. Despite most analysts' expectations of a tax rate between 40 and 42 percent, IBM's was a low 36.4 percent, down from the previous year's 45.3 percent.

Analysts were also disappointed in IBM's revenue growth. Revenues within the United States were down, and much of the company's growth in revenues came through favorable currency translations, increases that might not be repeated. In fact, some estimates of IBM's fourth-quarter earnings attributed $0.50 per share to currency translations and another $0.25 to tax-rate changes. Other factors contributing to IBM's rise in earnings were one-time transactions, such as the sale of Intel Corporation stock and bond redemptions, along with a corporate stock buyback program that reduced the amount of stock outstanding in the fourth quarter by 7.4 million shares. The analysts were concerned about the quality of IBM's earnings. Identify four quality of earnings issues reported in the case and the analysts' concern about each. In percentage terms, what is the impact of the currency changes on fourth quarter earnings?