Dell facing investor lawsuit over shady Intel kickbacks

Ah, Michael, look what a fine mess you've got us into this time. Sure, Dell's not the first company to get smacked with a bit of sharp interrogation regarding shady accounting practices, and it's definitely not the first to have allegedly collaborated with another outfit to benefit the group, but the Texas powerhouse is facing a lawsuit that accuses it of illegally accepted quite a bit of coinage it didn't (legally) deserve. The class-action suit claims that the firm "artificially inflated 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," which in a nutshell, doesn't bode well for either company if proven accurate. Of course, Dell's frolicking in the fields with AMD these days too, but the plaintiffs also contend that the corporation participated in a "widespread, long-running scheme to defraud shareholders and inflate Dell's stock price." As expected, nobody on the receiving end of this is taking any time to comment, and even though Rollins recently took the easy way out of his high falutin' position, himself -- along with Dell's accounting partner PricewaterhouseCoopers -- aren't out of this hot water just yet.

[Via Slashdot]

[Xavier Gill @ Feb 3rd 2007 3:28PM]

Corruption in American big business? Well I never...

[engadgetyk.web.bbbl67 @ Feb 3rd 2007 4:31PM]

This has got to be one of the worst kept secrets in corporate history. Just about everybody knew something about it, but nobody could prove it. Dell's direct marketing strategy is bullshit, everybody knew it, it had nothing to do with its profits, it was entirely because of the largesse of Intel chairman Andy Grove that Dell survives today as a PC company. This will of course destroy Andy Grove's reputation, it will probably mean in a couple of years Michael Dell himself will be forcibly removed from his company. And if he's put in jail, then it's likely that the company bearing his name may have to change its name to something else, avoid association with him.

[Someone @ Feb 3rd 2007 3:44PM]

Wow, it seems like all the major computer manufacturers are getting in some some sort of legal hot water these days (Although I haven't heard anything from Gateway about legal troubles lately). I guess this will dampen people's prospects for a quick turn-around from Dell, even with Michael back as CEO.

[Revrant2394 @ Feb 3rd 2007 6:49PM]

Intel having bribing companies to keep it's place?

Guess AMD wasn't so crazy after all...

[Thierry @ Feb 3rd 2007 9:13PM]

Finally they got caught. It seemed so obvious to me that they were taking bribes. No surprise there, just glad it's going to blow up in Dell and Intel's faces.

[appleuser @ Feb 3rd 2007 7:22PM]

Maybe it's time to shut down the company and give the money back to the shareholders?

[Ihar `Philips` Filipau @ Feb 3rd 2007 10:24PM]

Since there are only few comments and in-depth details, it is hard to judge.

Business-wise, it is normal. Company A pays some bonuses to customer company B since good sales of B also contribute as indirect advertisement of company A.

Accounting-wise - and as sparse details show it - the back payments of company A were /incorrectly/ (or illegally) written off as profits/etc - not subtracted from expenses - artificially inflating stock prices.

Well, you know what is said about PC industry: it lives off stickers. Intel I think pays lots of companies who put its stickers on their beige boxes. It is problem of Dell that it booked the payments in wrong column.

[keith waddington @ Feb 3rd 2007 8:05PM]

How ironic that the windows world is such a shady place!

and Vista's window frames are now transparent! That's what I call an interface design!

Long live irony

waddo
http://www.waddo.net/

[roach @ Feb 3rd 2007 8:46PM]

Isn't Stevie under investigation from undeclared money he received? Then you got the Chinese sweat shop issue. Then also the Itune issue with some European countries. Wow...Apple Lemmings seems to have memory selective problem.

[Jake @ Feb 3rd 2007 10:38PM]

I don't get what the big deal is. Intel paid Dell a bunch of money to be the exclusive provider. This increased Dell's profits.

They could have deducted it from their income or deducted it from their revenue. Either way, it adds to Dell's profits. And those increased profits led to a higher stock price. But that's the way it works! Ask, what would have been Dell's alternatives here: refuse the money? Accept it & report it? Consider that Intel probably wanted to keep the payments, unacknowledged, so the only way Dell gets the money if they keep quiet. Would they have been better off if they had refused that several hundred million dollars?

The whole thing is nonsense. Besides that, who's gonna pay for the settlement? Dell, obviously, which reduces the value of their stock for current investors. The whole idea of these class-action shareholders who essentially sue themselves is just bizarre.

[Rand @ Feb 4th 2007 11:52AM]

Ihar got it right. Intel would pay funds to use for advertising to put "Intel Inside" stickers on a companies products and in their print/media advertising. Microsoft would do the same thing.

The only people who will getting rich off this "scam" are the lawyers.

[yessindeed @ Feb 4th 2007 3:27PM]

"How ironic that the windows world is such a shady place!"

Yeah unlike RIAApple who cut under the table deals with Flash suppliers to lock out competitors and of course Job's own woes with backdated stock options. You can argue other companies did the same but how many forged paperwork to try to cover it up?

Windows world? You guys really do think you're fighting some holy war. I swear in a few years RIAApple is going to be the next Scientology. I don't mean that facetiously I can picture RIAApple fans in mass weddings like the moonies with Jobs performing the ceremony.