Dell lowers 1st-qtr profit by $100M to set aside legal reserve it may have to pay SEC
By APThursday, June 10, 2010
Dell lowers 1Q profit to build $100M legal reserve
ROUND ROCK, Texas — Dell Inc. said Thursday that it lowered its first-quarter results by $100 million, or 5 cents per share, to set aside a $100 million reserve it may need to pay out as part of a settlement related to an ongoing SEC accounting probe into the computer maker’s accounting and financial reporting practices.
The company also said its CEO, Michael Dell, is talking with the Securities and Exchange Commission about a possible settlement.
Dell first disclosed an internal investigation into its accounting in 2006, saying it was notified in August of that year of an SEC inquiry related to its revenue recognition and financial reporting.
In 2007, it said it would restate more than four years of financial results with lower earnings after the probe found that its employees had misled auditors and manipulated results to meet performance targets.
Dell said Thursday that a settlement would include negligence-based fraud charges and non-fraud based charges connected to disclosures and alleged omissions that occurred before fiscal 2008 as part of its relationship with chip maker Intel Corp.
Dell said in a statement that its CEO and the SEC have begun talking about a “settlement framework” to resolve the allegations against it.
In the statement, Dell said that a settlement would not prevent Dell from working as an officer or director of a public company, and “would be made without admitting or denying the SEC’s allegations.”
In May, the company had reported a profit of $441 million, or 22 cents per share, for the Feburary-through-April quarter. The company says its profit for that period is now $341 million, or 17 cents per share. Its adjusted earnings remain the same at 30 cents per share.
Dell’s shares dropped 30 cents, or 2.3 percent, to $12.77 in after-hours trading following its news release. It ended the regular session up 29 cents at $13.07.
