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Finance analysis
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Dell Inc. (DELL) revealed that it is delaying the filing of the Form 10-Q World software computer systems manufacturer Dell Inc. (DELL) revealed that it is delaying the filing of the Form 10-Q for its recently completed second quarter due to earlier disclosed informal investigation by the U.S. Securities and Exchange Commission, together with an internal search, into certain accounting and finance analysis reporting matters of the company.
The company also revealed that the U.S. Attorney for the Southern District of New York has subpoenaed documents related to Dell's financial reporting from 2002 to the present. Resulted by these events, the company suspended its ongoing share buyback program until further notice. However, the company said it intends to file the report as soon as possible. Company unable file form connection with the SEC investigation The Round Rock, Texas-based company noted that it is unable to file the Form as questions were raised in connection with the SEC investigation and the subsequently initiated independent investigation by the Audit Committee of its board of directors. Dell received notice from the SEC While releasing second quarter results on August 17, the company had noted that in August 2005 Dell received notice from the SEC about the informal investigation of the company. The notice stated that the investigation is not an indication that any violations of law have occurred. The SEC then had requested information relating to revenue recognition and other accounting and financial reporting matters for certain past fiscal years, and Dell has been cooperating. Issues have material impact on its financial position In the due course, the company discovered information that raises potential issues relating to certain periods prior to fiscal 2006. Even though the company believed that these issues have had or would have any material impact on its financial position or the reported results of operations for the relevant years, the company's audit committee, upon the recommendation of management, initiated an independent investigation. The investigations have pointed out the possibility that the company misstated in prior period financial reports, including issues relating to accruals, reserves and other balance sheet items that may affect the company's earlier posted finance analysis results. In order to determine whether any restatements of prior period financial reports would be necessary, Dell noted that, the company is working with its independent auditors and the Audit Committee. Don Carty, chairman of the Audit Committee reviewing the matter, commented, We have not yet reached any conclusion on materiality as to these issues. We are continuing to investigate the matter fully. Dell has suspended its ongoing share In addition, Dell has suspended its ongoing share repurchase program until further notice in the wake of these negative developments. Further, given the delay in its 10-Q filing, the company has postponed the meeting with analysts that was to be held on Wednesday, September 13 and said it would reschedule it to a later date. However, Dell would be holding its Technology Day on Tuesday, September 12, in New York showcasing its latest products and services. The company pointed that all inquiries regarding the latest developments should be directed
to Lynn Tyson, Vice President, Investor Relations and Global Corporate Communications. Among the rivals, Hewlett-Packard Co. (HPQ) is also facing an investigation by the California state investigators into leaks finance analysis of confidential information from its board of directors. The California state investigators, who are probing into how the company traced phone records of HP directors as well as nine reporters as stated by HP, currently believes the involvement of criminal activity in the methods used to search the records. The beginning of the scandal was in early 2005, when the details of the HP board's discussions about former CEO Fiorina, who was thrown out in February 2005, was leaked to the media. Dell in mid August voluntarily recalled about 4.1 million lithium-ion notebook computer batteries with cells manufactured by Sony, which posed the risk of a possible overheating or fire. Dell, however, does not expect this recall to have a material adverse effect on its results of operations, financial position or cash flows. During its recently completed second quarter, Dell's earnings fell 51% from last year despite a 5% rise in revenue, as the company priced its products aggressively in a slower market and also it incurred higher operating expenses. The world's largest PC maker's net income for the second quarter was $502 million or $0.22 per share, compared to $1.02 billion or $0.41 per share in the last year. Meanwhile, the company's topline rose to $14.09 billion from $13.43 billion in the same quarter last year. Kevin Rollins, Dell chief executive officer, then said, While we are disappointed with the results for the quarter, we are taking the necessary actions to correct missteps and improve our results for the long term. Key actions include accelerating cost initiatives, increasing investments in service and support, and better pricing management. The only light among the company's dark results was that Dell extended its relationship with Computer microprocessor maker finance analysis Advanced Micro Devices, Inc. (AMD) recently, which first announced last quarter. Dell noted that it would launch Dimension desktop computers with AMD processors and would introduce a two-socket and multi-processor server using AMD Opteron processors by the end of the year. Recently, on August 18, Deutsche Bank upped its price target on DELL shares to $25 from $24, while raising 2007 earnings per share estimate to $1.05 from $1.00 and its 2008 estimate to $1.25 from $1.15. DELL is currently trading down $0.79 or 3.65% at $20.86, on a volume of 18.97 million shares. For the past 52-weeks, shares traded in the range of $18.95-$35.25.
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