Dell has recently released information regarding ongoing talks with the Securities and Exchange Commission to settle allegations made against it, accusing Michael S. Dell, founder and chief executive of financial irregularities in connection with dealings involving Dell and Intel.
The investigations initially started back in 2005 and were made formal in 2006. The allegations are not of a criminal nature and they have already made Dell admit to misconduct and pushed the company to restate and adjust financial results of 2003 to 2007 first quarter. On disclosed sources claim that SEC’s investigations are related to Dell’s accounting practices used to account for rebates and payments received from Intel. SEC had not offered any comment on the investigations and both Intel and Dell had declined to speak on the allegation apart from Dell’s recent press release.
The company has now disclosed that $100 million has been earmarked for possible settlements of any of the investigated allegations, including a separate extended investigation into the company’s financial accounting system carried out by SEC. Dell also stated that settlement of any of the allegations will not stop Mr. Dell from serving as a director and officer of a public company, and that settlement would be made without formally denying or admitting the allegations.
Dell has now said that settlements with SEC will relate to Dell’s disclosures and alleged omissions, as well as alleged violations of provisions of a non-fraud nature and negligence based fraud provisions.
Dell also stated in the press release that it would record $100 million as liability to settle its extended accounting practice problems. To reflect this liability it would its reduce net income reported for the first quarter of 2011 by $100 million or reduce share price by 5 cents.
According to a statement credited to Sam Nunn who is a Dell board director as well as being a formal US senator, Dell is hopeful that the discussions of settlement will help reach a comprehensive resolution in the nearest future. He also stated that Mr. Dell continues to receive the full support and complete confidence of the board of directors.
Relationship between Intel and Dell had previously come under search light in November when Andrew M. Cuomo filed an antitrust lawsuit. The suit was filed against Intel by the New York attorney. The suit accused Intel, the largest chip maker in the world of bribing Dell and other manufacturers with rebates and co-marketing arrangements to persuade them to use its chips and products in their computers instead of using cheaper chips made by Intel’s rivals, Advanced Micro Devices. Intel however denied the accusations.
The lawsuit filed against Intel by Mr Cuomo revealed e-mail messages between chief executive of Intel, Paul S. Otellini and Mr Dell. In the e-mail, Mr. Dell was said to have complained of losing sales to rival manufacturers using A.M.D chips. Mr. Otellini was said to have reminded him that Dell had received over $1 billion in the past year, which should serve as adequate compensation for the loses to competition. Mr Otellini was later said to have described Dell in another e-mail to a colleague as the best friend money can buy.
After this recent press release, share price for Dell’s stock dropped by 2 percent at the end of trading day. Analysts however see the possibility of a settlement as a positive move that should attract investors. Since 2005 when Dell SEC’s woes began, value of the computer giant’s stock has fallen by two-thirds. However, as at April 30, the value of Dell’s short term investment and cash was reported to be almost $11 billion.