Seeking Alpha
SA's VP content, editor in chief
Profile| Send Message|
( followers)  
Excerpt from our One Page Barron's Summary (receive it weekly by email by signing up here):

TECHNOLOGY TRADER: Dell by Bill Alpert

Highlighted companies: Dell Inc. (NASDAQ:DELL), Hewlett-Packard Co. (NYSE:HPQ), EMC Corp. (NYSE:EMC)
Summary: Friedman Billings Ramsey hardware analyst Clay Sumner asserts in a report published Friday that Dell (DELL) has been manipulating its earnings by under-compensating for warranty costs; he claims Dell EPS figures have overstated earnings by $0.02-$0.08/share in five of the past 12 quarters. He Dell Chart 3 12 06accuses Dell of using warranty accruals to custom-fit earnings -- citing that while warranty claim rates have been relatively stable, accrual rates have varied wildly. Dell, he says, tends to under-accrue during poor seasons and over-accrue in better times, but the overall trend since Q3 2003 has been toward under-accrual. Warranty costs are currently 46% of its warranty reserve, well above Hewlett-Packard Co.'s (HPQ) 26% and EMC Corp.'s (EMC) 13%, and that Dell with its large corporate sales base (85%) should be more in-line with EMC that with HP. With actual claims rising steadily, he warns earnings restatements may be on the way.
Related: Dell Over-Stating Profits, FBR Analyst SaysSeagate CEO Disses Dell and CreativeIs DELL Optimism REALLY Warranted?A Dell Long Play: Buy the Stock Only When it Comes to YouAnalysts Still Skeptical On DellDell Q2 2007 Earnings Conference Call Transcript

Source: Dell Cooks the Books -- Barron's