Just one day after Dell CEO Kevin Rollins left the company to be replaced by Chairman and founder Michael Dell, it is being accused in a lawsuit of improper accounting in its longtime partnership with Intel Corp. The suit alleges Dell's profits were inflated through rebates from Intel that it failed to disclose. At times, it asserts, Dell was receiving illegal kickbacks of as much as $1b/year. The suit, filed late Wednesday, seeks class- action status on behalf of Dell shareholders, and names both Mr. Dell and Rollins; the company declined to comment. Dell's accounting practices have been under SEC scrutiny over the past few months, and several suits have already been filed. The current suit focuses on payments from Intel to Dell that were made at or near the end of Dell's quarters that had a "direct, material impact" on reported profits. The payments were in exchange for Dell refusing to do business with Intel competitor AMD. The suit asserts that since 1999 Dell has designed computers based on AMD chips, but the systems were never produced as a result of the kickbacks. Intel's business practices are already under investigation by European authorities; it says the rebate programs are legal. Chuck Mulloy, an Intel spokesman, said that "at first glance it appears that some of the allegations with respect to Intel appear to have been completely made up."
Sources: Wall Street Journal
Commentary: Dell: The Problems Began In China • Michael Dell Has His Work Cut Out • Dell Cooks the Books -- Barron's • Dell's Accounting Practices: No Cause For Concern
Stocks/ETFs to watch: Dell Inc. (DELL), Intel Corp. (INTC)
Seeking Alpha's news summaries are combined into a pre-market briefing called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only a few seconds to sign up.