Dell Set for $100 Million SEC Settlement, CEO May Face Fraud Allegations

Daily Finance ^ | June 10, 2010 | Dawn Kawamoto

[SunkenCiv]

Michael Dell is expected to face allegations of committing fraud through negligence... however, is expected to remain as CEO and chairman of the company he founded... The company has been steadily losing market share to competitors as it has seemed to lose its footing. There have also been allegations that it got an artificial boost to its earnings by receiving sizable marketing dollars from Intel to maintain an exclusive relationship with the chipmaker -- providing it stayed away from Intel archrival Advanced Micro Devices (AMD). But even for the struggling computer maker, a $100 million settlement would be less than a third of Dell's $341 million in first-quarter net income -- and a drop in the bucket compared to the $14.8 billion in revenue it generated during the period... in 2005, the SEC launched an informal inquiry into Dell's method and timing for booking revenue at the end of the quarter. Dell... subsequently launched its own internal investigation... completed in 2007, finding it needed to revise 17 quarters going back to 2002, which reduced its profits overall by $92 million, according to an American Statesman report... The presiding director, Sam Nunn, says: "...Michael Dell will continue to lead the company as its chairman and CEO, and he continues to have our complete confidence and support." ...after it announced first-quarter performance, it has to revise the figures downward... 5 cents a share, on a GAAP basis. The non-GAAP figures, however, won't change. Dell also had to delay filing its formal quarterly report with the SEC because of the settlement discussions, but they had progressed enough to let the company to file on Thursday. Shares of Dell fell 2% in after-market trading to $12.81 a share, after closing up 2.3% to $13.07 in regular Nasdaq trading.

[SunkenCiv]

My favorite anecdote from this fiasco is how Dell told its support to avoid phrases like "known issue"; one of the institutional customers was told that they'd burned out all their CPUs by making them do complex math, then considered trying to get them to buy another batch of higher-end boxes. Frickin' genius!

• Dell to Restate Earnings After Probe
• Dell - Emachines and the power supply debacle
• Dell Shares Tumble, Analysts Mixed on 3Q
• PC-maker Dell's profits slump 63%
• Dell: Linux Netbook High Return Rate 'Non-Issue'
• Where is Michael Dell and why has Dell gone to Hell?
• In Faulty-Computer Suit, Window to Dell Decline
• Dell faces fresh threat from old PC failures
• Growth of Wireless Internet Opens New Path for Thieves -- Law enforcement officials warn that such connections are being commandeered for child pornography, fraud, death threats and identity and credit card theft.
• Dell Hell: Computer Giant Faces Consumer Lawsuit - Consumers Allege Didn't Get Tech Support Paid For
• 10-Q: Apple served in one new lawsuit, settles four others -- Mediostream, Inc. v. Acer America Corp. et al. - filed August 28, 2007, against Acer, Dell, Gateway, and Apple, this lawsuit alleges infringement of a U.S. patent entitled "Method and System for Direct Recording of Video Information onto a Disk Medium." Apple filed its answer to the complaint on January 25, 2008, denying all material allegations. Apple also filed a motion to transfer the case to the Northern District of California.
• Computers Stolen From Boston ACORN Office -- ...three Dell laptop computers were stolen from the group's Dorchester, Mass. office around 10:15 p.m. Wednesday... the alarm had also been ripped from the wall and wires had been damaged... two downstairs offices also were ransacked, two vending machines were damaged and change stolen from them.
• Andrew Cuomo Took Contributions From Lawyers Representing People He Was Investigating -- Lawyers defending Dell Inc., Deutsche Bank AG and a former state political party chief in Cuomo cases also contributed to him, records show.
• Cuomo's campaign took money from attorneys for clients his office probed
• Anatomy of a Government-Abetted Fraud: Why Indymac/One West Always Forecloses -- The principle owners of OneWest Bank include Michael Dell and George Soros. (George was a major supporter of Barack Obama and is also notorious for knocking the UK out of the Euro Exchange Rate Mechanism in 1992 by shorting the Pound).
• Chuck Schumer fund-raiser John Paulson is key figure in Goldman Sachs fraud case, records reveal -- Schumer crashed Indy Mac bank by spreading a rumor. The company failed. About 9 months later John Paulson, Soros, Micheal Dell and JD Flowers together bought the wreckage or Indy Mac. What did they get? A mtg bank recapitalized by Uncle Sam. Billions in tax loss carry fowards into the future.
• Wal-Mart, Dell offers help breathe new life into LinuxDell Drops AMD Chips From Many Machines
• Exclusive: Dell set to introduce AMD Tri-Core Phenom
• Dell to buy $52 billion components from China
• Dell to save $3 billion, shut Austin plant, cut jobs
• Dell cutting 1,100 jobs in Canada
• Dell’s New Support Plan: Pay to Speak to an American
• Dell Plans to Sell Factories In Effort to Cut Costs
• Michael Dell asks workers to consider taking up to five days off without pay. (I told you so)
• Dell to employees: Help tighten the belt
• Dell touts luxury brand but offers few details
• Insider Trading (Again - DELL)
• Dell to close N.C. plant, lay off 905
• Dell closing Winston-Salem plant
• BUSTED: "Is DELL Computer Aiding N. Korea [Weapons Program] In Violation of US Federal Law?"
• Having wireless trouble with My Dell laptop(vanity)

"Leave Brittany Alone!"

Google

[OldDeckHand]

It's rough seas ahead for Dell. They have this hanging over their heads as well...

Dell faces fresh threat from old PC failures

NEW YORK (CNNMoney.com) -- A six-year-old hardware meltdown that plagued millions of computers is coming back to haunt Dell.

From 2003 to 2005, Dell sold computers with faulty capacitors that allegedly caused most motherboards on two Dell Optiplex models to break, rendering the computers useless. Dell was aware of the issue, according to recently unsealed court documents from a pending lawsuit, yet continued to sell the computers anyway.

Not good to be a Dell shareholder.

[RicocheT]

Most of these so-called violations are minor, technical and not any different than most other PC makers of the era. PC mother boards had capacitor problems, Intel bought market share and if Intel wanted to hand Dell, Gateway, etc. money, who said no, AMD was always playing catch up and winning through law suits was part of its business plan. I was building my computers from parts and had many parts come in bad or later fail, I lived with it as I had reasonable expectiations.

Dell did consumers a favor by making cheap and reasonably reliable PCs & laptops. I saw let the market pick winners, not government regulators.

[chaosagent]

Actually it wasn’t just Dell with this problem. It was pretty much everybody.

The company that made the bad caps sold throughout the industry.

I had boards from Compaq, Gateway, HP, third parties, and even Intel themselves, with the problem.

The diffence is that other companies stepped up to the plate and took care of the problem.

[SunkenCiv]

The market has, or will soon. Nice hearing from ya.

[SunkenCiv]

/bingo

Thanks chaosagent.

[SunkenCiv]

Yup. In a business with margins similar to bananas, it behooves one to make sure the parts makers are doing it right.