PHOENIX (Reuters) - International Business Machines Corp. said on Thursday it is looking to repatriate $8 billion of undistributed profits earned outside the United States as part of a one-time U.S. tax holiday policy.

In a regulatory filing, the world's largest computer company said recognizing the $8 billion in profits would result in an income tax expense of up to $550 million, which it would take as a charge against quarterly earnings once the company's management and its board of directors approve the plan.

IBM also said it had discovered in the past month that certain employees of its global services business in Japan improperly resold equipment from another company, cutting its 2004 sales and costs by $260 million.

Of the total reduction, IBM's fourth-quarter earnings reported in January had already factored in a $50 million cut.

In a news conference in Tokyo on Friday, IBM Japan said some of its employees had improperly recorded business transactions but there was nothing criminal and no damage was done to its clients.

"We have set a quite rigid internal code of conduct. It's regrettable that the conduct of some of our employees went against that high standard," IBM Japan President Takuma Otoshi told reporters.

Otoshi declined to go into details, but said the misconduct involved costs and sales that were posted in violation of IBM's internal accounting policy.

"We offer hardware, software and services solutions. Other firms' products are included in the package. We buy a product for 100 yen and sell it for 105 yen, for example. What we did (to remedy the accounting violation) is we took out 100 yen on the cost side and we also took 100 yen out of 105 yen on the revenue side," he said.

Otoshi said the company was taking appropriate disciplinary action, but declined to elaborate.

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The parent company said the revenue, and resulting cost reductions, represent 0.2 percent of its 2004 revenue of $96.5 billion. It will have no impact on gross profit, income from continuing operations or cash flow, the company said in a filing with the U.S. Securities and Exchange Commission.

IBM said it is evaluating the possible effect on its financial results of recognizing $8 billion in profits from some of its more than 80 non-U.S. subsidiaries as part of a program under the American Jobs Creation Act of 2004 from which many U.S. companies, including Hewlett-Packard Co., Johnson & Johnson and Pfizer Inc., stand to benefit.

In a separate filing on its 2004 results, IBM highlighted 45 percent growth in what it calls Business Performance Transformation Services (BPTS), a new market that IBM believes represents a $500 billion chunk of technology spending and of which it one day hopes to capture 10 percent, or $50 billion.

BPTS is the lynchpin of a bid to win more profitable, quick-turnaround services contracts, John Joyce, IBM's former chief financial officer and now head of its global services business, said in a speech to investors in Phoenix.

These services, which involve IBM setting up customer service, payroll and other business functions for companies to pare internal costs, are designed to supplement and to some degree make up for the declining growth of multi-year contracts IBM has enjoyed in the past.

Signings of big-ticket contracts fell to $43 billion in 2004 from $55 billion in 2003, the regulatory filing showed.

(Additional reporting by Yuka Obayashi and Kiyoshi Takenaka in Tokyo)