“Investors have filed a lawsuit against Dell Inc., accusing the computer maker of improperly accounting for hundreds of millions of dollars in payments from long-time partner Intel Corp., an attorney for the plaintiffs said on Friday,” Reuters reports.
Reuters reports, “The lawsuit accuses Dell of artificially inflating profits ‘by secretly receiving approximately $250 million a quarter in likely illegal rebate kickbacks payments’ from Intel in return for an exclusive deal to purchase Intel’s microprocessors, class-action lawyer William Lerach told Reuters.”
“The plaintiffs also contend that the company and its executives participated in a ‘widespread, long-running scheme to defraud’ shareholders and inflate Dell’s stock price, said Lerach, head of law firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP in San Diego,” Reuters reports.
Reuters reports, “The suit was filed on Wednesday in U.S. District Court in Austin, Texas, by the union-backed Amalgamated Bank’s LongView Funds and the UK-based West Midlands Pension Fund, Lerach said. It seeks class-action status on behalf of other investors. A Dell spokesman said the company does not comment on pending litigation. The company has not seen the lawsuit, he added.”
Full article here.
MacDailyNews Take: Dell’s future is so bright, we’ve gotta wear night vision goggles.
Related articles:
Michael Dell is no Steve Jobs – February 02, 2007
BusinessWeek: Welcome back, Michael Dell – don’t get too comfortable – February 01, 2007
Rollins out as beleaguered Dell’s CEO, replaced by Michael Dell immediately – January 31, 2007
Fortune: Michael Dell reiterates he’d love to sell Apple’s Mac OS X if only Jobs would license – January 22, 2007
Total eclipse of Michael Dell goes off as predicted – January 10, 2007
SEC starts formal probe of beleaguered Dell – November 16, 2006
Apple does it again: New Macbook Pros much cheaper than Dell – October 25, 2006
Dell feels the heat from Apple – October 04, 2006
The Motley Fool: ‘Intel to Dell: you guys stink’ – September 28, 2006
Beleaguered Dell’s OS-limited PC sales ‘declining rapidly below expectations’ – analyst – September 21, 2006
Fortune compares Mac vs. Dell: ‘you’ll get more for your money with Apple’ – September 11, 2006
PC box assemblers like Dell and others wish Apple would license Mac OS X – August 31, 2006
AP: Time to think different, Apple Mac beats Dell on price, software compatibility, and more – August 23, 2006
Dell profit falls almost in half; announces informal SEC probe – August 18, 2006
Dell cannot compete with Apple’s new Mac Pro price or feature set – August 15, 2006
Bear Stearns: Apple’s new Mac Pro, Xserve pricing well below comparable Dell systems – August 09, 2006
Dell warns of earnings miss; shares plunge 15% – July 21, 2006
Survey shows big jump in consumer interest in buying Apple Mac; Dell takes steep slide – July 06, 2006
Dell warns 1Q earnings will miss mark; shares tumble – May 08, 2006
Apple passes Dell in market value – May 02, 2006
InformationWeek: Apple Mac run Mac OS X, Windows, and Linux; Dell and HP should be concerned – May 01, 2006
Dude, you got a Dell? What are you, stupid? Only Apple Macs run both Mac OS X and Windows! – April 05, 2006
Apple Mac is #1 in European education market, pushes Dell down into second place – February 03, 2006
Well, enjoy this now; we won’t be hearing another word about this in the national media. Up next at 11: Will the Apple stock scandal affect the iPhone…?
These guys suck.
Well in this day and age, if it involves money, I think we all suck a little bit.
But wow. These guys suck.
What about Intel’s roll in this?
wow, MDN, bad joke.
You mean their margins on their CRAP boxes were even lower than they reported? What a surprise. Of course, even though there are million that are stupid enough to buy this crap, at least they are not stupid enough to pay high prices.
Reuters reports, “The lawsuit accuses Dell of artificially inflating profits ‘by secretly receiving approximately $250 million a quarter in likely illegal rebate kickbacks payments’ from Intel in return for an exclusive deal to purchase Intel’s microprocessors, class-action lawyer William Lerach told Reuters.”
Hate to defend Dell but this is crap. It doesn’t matter how Dell reports the payments, either as revenue or a reduction in COGS, the result will be higher profits.
Kickbacks? Give me a break. Dell got preferential pricing by agreeing to a sole source supply contract. The amount they got back was determined by the amount they purchased, hence the payment after the fact.
Anybody notice that the law firm involved was investigated by the AG for illegally paying plaintiffs to bring their suits to them?
Gregg, I agree with you. Nothing to see here, except upset shareholders. I’d be pissed too if I owned some of Dell.
MDN Word = Perform, not likely in Dell’s case.
What the difference between “receiving kickbacks” and “bargaining for preferential prices”? There seems to be a fine legal line here. If shareholders received financial benefit of the Dell-Intel deal, assuming that the deal was legal, why are they complaining? It would seem that shareholders are upset they didn’t know everything about the business relationships that Dell developed, but this doesn’t seem reasonable. Are shareholders typically apprised of every letter, promise, contract, or agreement that companies make?
This is going to have some issues with Intel too, don’t you think?
I agree, it’s not clear that Dell’s shareholders have any beef here. They got more money into the company. Intel’s shareholders may have a different take on it.
-jcr
As much as I’m not a fan of Dell… c’mon MDN. This is a just a stunt by the litigation bar. And if Dell got the fine points of accounting wrong, BFD. I don’t know the accounting fine points, but at worse, they put it on the wrong line or in the wrong quarter.
And the story I read made it sound quite reasonable… they used the payments from a supplier to reduce cost of goods sold. That’s certainly how I’d account for it with a logical Accounting 101 perspective. It would be more suspect if they used it to inflate revenue. (Though I’ve no idea what the actual rules are.)
These lawyers are the same people who are suing (with straight faces) Apple because SJ has “damaged” the shareholders he’s made rich.
“Possibly illegal kickbacks” sounds like slimy lawyer speak for “rebate”. Plus, while Intel’s marketing practices might have been illegal, that doesn’t make it a crime for me to buy their products under their terms. MS purchasers/users did not commit wrongdoing just because MS engaged in illegal monopolistic practices.
No fan of Dell here, but let’s never lose sight of what vampires the shareholder suit lawyers are.
Puh-leeeeeease.
night vision goggles!! Now that’s funny!
It’s not too late for Mikey to shut the company down and return the money to the stockholders.
If this really is a problem (which I doubt), will this be similar to the current financial relationship between Intel and Apple? Let’s not gloat yet.
I still like the term “Selling Like Snot Cakes” talking about the ZUNE.
Or yeah DELL, thats where all my reseller support money went.
Oh that Intel and bundles have been paid by AMD too.
God is loving Macs today..
Whew! This is a potential nut cruncher for Dell if true…and maybe fallout on Intel, too.
But then when is a rebate known as a kickback???
Is every coupon I redeem a bribe?
How much is Apple getting from Intel to be Intel-exclusive???
I hope that Apple release Mac OS X to both Intel and AMD.
The joke isn’t necessarily a lol joke, but get’s the point across nicely.
Only night vision goggles will light up the dim future Dell has in store…
…or am I explaining the obvious?
yes you are
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“Well in this day and age, if it involves money, I think we all suck a little bit”
???
Speaking of great MDN quotes, I agree that “…night vision…”, “…snot cakes…”, and “…Mikey’s liquidation…” are classics.
Another classic was, “The only way Microsoft could make a product that doesn’t suck is if they went into the vacuum cleaner business.”
Oh, and let’s not forget, “OMG, it looks like that Asian girl is being raped!” from a MDN reader in reference to the Zune installation error message image.
Priceless!
Wow! Another bullshit story by the MacFracks at MDN (Microsoft and Dell News).
How low do you have to stoop to get hits on your site?
Dude you bought a Dell? what a moron!
This could be really bad. A class action suite is no laughing matter, especially with the kind of numbers we’re talking about. Yet another good reason to buy a Mac
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Pi
This is most definitely NOT a ‘b.s.’ suit if the allegations it contains are true. It’s claiming that intel is giving Dell a billion dollars a year in kickbacks, which Dell reported as profits from computer sales.
People invest in corporate stocks primarily based upon the financial performance of the company. Being dishonest in how much money a company is making, or how the company is making it, causes people to buy the stock under false pretenses and affects its price on the market.
Dell reportedly has sales of $60 billion, so people may wonder why this one billion would matter. But this refers to yearly sales, and not yearly profit. Dell is primarily a large volume seller of lower priced consumer systems, which have a thin profit margin. This is why Dell allows ‘craplets’ to be installed on its machines for $40 or $60. If you’re selling a desktop system for only $350 or $450 dollars, that craplet money will huge difference in how much of a profit the company makes on the sale of that system. In Dell’s case, pennies here and there can make or break the company.
The major sin is that Dell did not disclose that the billion dollars a year of its bottom line came from Intel. Assuming that Dell has a 10% profit margin on its product line, that means that Dell made 6 billion dollars, and 1/6 of that came from the kickback. This is not insubstantial chump change, it’s a major part of the company’s yearly profits.
If I were an investor, I would be squeamish about buying a stock where 1/6 of the profit came from an under the table deal; certainly it would affect how much I would pay for the stock. I’d pay less for it, since the kickback could stop at any time; Intel could simply choose to quit subsidizing Dell.
I’m also unsure if this could have legal or criminal ramifications for Dell, since it sounds like it’s engaging in anti-competitive, monopolistic practices by Intel.
In short, Dell has falsified its assets and profitability to woo investors. It’s the same thing as me borrowing my roommates new sports car and my uncle’s bank-roll to make a girl think I was filthy rich in an attempt to get her into the sack.
I’ve put way too much thought and energy into this…
All kidding aside I hope Dell goes out of business. They are an ugly blemish on the American technology sector, a gross festuring zit oozing revolting stuff.
The Dell website is a shell game. They have obviously forgotton customer service and any shred of honesty, all they care about is moving a lot of cheap PCs. That’s not what grew the company but that is what it has become, just push out as much cheap crap as possible.
Good by Dell. I hate you now!