Jim Schneider - CFO
...I want you to know that in August 2005 we received notice from the U.S. Securities and Exchange Commission that it was conducting an informal investigation of the Company. The notice stated that the investigation is not an indication that any violations of law have occurred. The SEC has requested information relating to revenue recognition and other accounting and financial reporting matters for certain past fiscal years. Dell has been cooperating.
In the course of responding to the request, we recently discovered information that raises potential issues relating to certain periods prior to fiscal 2006. While we do not believe that these issues have had or will have any material impact on our financial position or our reported results of operations for the relevant years, our audit committee, upon the recommendation of management, has initiated an independent investigation. We are committed to addressing any questions, concerns or issues the SEC or the audit committee may have.
Richard Farmer - Merrill Lynch
... on the SEC informal investigation, I think you said August 2005. Is that date accurate? If it is, why did you wait a year before disclosing it? What is different today versus a year ago? But more importantly, what are the issues that are being looked at in your revenue recognition, either by the SEC or by the internal group that you have had look at it?
Kevin Rollins- CEO
On the investigation, you put it in the right context. An informal investigation really starts out as a letter from the SEC just requesting some information from you. At the time we got it, it seemed like we responded to the information. There was really no reason to disclose it at that time. And in fact, what I understand, there is hundreds if not more of such “investigations” started each year by the SEC and the vast majority are not disclosed because you really have a dialog process on some issue they want information on.
This has gone on in a deliberate process for about a year, which we put in the press release. In the course of researching some matters related to a request from them very recently here, we uncovered a couple of issues going back prior to fiscal 2006 that we felt warranted an additional look. We decided rather than just management doing it, we would have a investigation done by our audit committee.
But in any event, as this goes on and more people get involved internally, it is really a matter of we're not trying to necessarily keep this a secret from people, but the longer something like this goes on, we felt like we should disclose it publicly. Again, I don't believe that the issues that are under investigation right now should cause any material change to our financial position or results of operations for the years under question.
Richard Farmer - Merrill Lynch
If I could just follow-up on that, just qualitatively what are the issues? Is it something to do with services, recognition, or can you just help us understand topically what you're looking at, understanding that you don't expect it to be material when you finish the process.
I really can't comment on that since it is under investigation. At the appropriate point we will let you know more.