Dell executives are in discussions with federal regulators to settle
allegations of financial misconduct brought by the Securities and Exchange
Commission related to the tech vendor’s dealings with chip maker Intel.
The discussions involve both an investigation by the SEC that
began in 2005 regarding accounting practices related to its business
relationship with Intel and a newer investigation about the two companies’
dealings that apparently more directly involves CEO Michel
Dell.
Dell executives have put aside $100 million to cover a
settlement with the SEC stemming from the earlier allegations that led the
company to restate its financial results from 2003 into early 2007, the company
said in a June 10 statement.
Dell is revising its fiscal 2011 first-quarter numbers to
reflect the possible settlement.
The settlement would cover alleged violations of federal
securities laws, including antifraud provision, according to Dell.
The allegations involving Michael Dell relate to “disclosures
and alleged omissions” before the company’s fiscal year 2008 involving Dell’s
business relationship with Intel. The company did not elaborate, but the New
York Times reported that a source briefed on the case said the
investigation related to how Dell accounted for payments and rebates that it
had received from the giant chip maker.
Dell said that any settlement with the SEC would not include an
admission or denial of the SEC’s allegations, and would not bar Michael Dell
from running the company.
Sam Nunn, a former U.S.
senator and the presiding director of Dell’s board, said he expects the
investigation to be settled soon.
“We are hopeful that these settlement discussions will achieve
a comprehensive resolution in the near future,” Nunn said in a statement. “The
independent directors of the Board have affirmed that Michael Dell will
continue to lead the company as its Chairman and CEO,
and he continues to have our complete confidence and support.”
Charles King, an analyst with Pund-IT Research, said the
settlement with the SEC makes sense for Dell.
“From a monetary standpoint, it shouldn’t hurt the company very
badly,” King said in an interview. “Certainly $100 million is nothing to sneeze
at, but in terms of recent SEC settlements, it’s larger than some, but not as
big as others.”
It also allows Dell to get out from under the allegations and
move on with its business, particularly given Intel’s stated intentions to fight
lawsuits it’s facing, a battle that could take a long time.
“I expect the folks at Dell just said that it was time to pay
the piper and whatever Intel wants to do is fine,” King said.
Intel has come under considerable scrutiny over the past year
for its business practices relating to OEMs, and Dell in particular.
The chip maker is being sued
by the Federal Trade Commission and the N.Y. State Attorney General’s
Office for alleged anti-competitive practices. The agencies claim that for more
than a decade, Intel used its dominant position in the x86 chip market to
coerce OEMs to limit their use of products from rival Advanced Micro Devices.
The FTC said Intel officials later did the same to hold down sales of Nvidia’s
graphics technologies.
According to the lawsuits, Intel used a combination of
payments, rebates and threats to persuade such systems makers as IBM,
Dell and Hewlett-Packard to limit their use of AMD
processors in their systems. Dell
was the biggest beneficiary, according to the New York AG’s Office,
receiving more than $6 billion from Intel between 2002 and 2007.
Dell was the last of the major OEMs to incorporate AMD
processors in its PCs and servers.
The FTC also accused Intel of altering its own technologies to
hinder the performance of competing products.
Those lawsuits came months after the European Commission, the
antitrust arm of the European Union, levied a $1.45 billion fine against Intel
for similar practices there. Intel appealed the fine.
Intel officials have strongly denied the allegations and have
promised to fight the lawsuits, which came even after Intel and AMD
reached a $1.25 billion settlement in their long-running lawsuit.
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