Dell to restate results after finding manipulation

An internal audit found that certain employees had changed corporate account balances in order to meet quarterly financial targets, the company said today.

Dell will restate its earnings for fiscal years 2003 through 2006 and the first quarter of 2007 after an internal audit found that certain employees had changed corporate account balances in order to meet quarterly financial targets, the company said Thursday.

In the new financial results, Dell will cut a total of US$50 million (AU$63.47 million) to US$150 million of net income from its previously reported cumulative total of US$12 billion for the entire period. That translates to a reduction in Dell earnings of US$0.02 to US$0.07 per share from a cumulative total of US$4.78 per share, Dell said.

The company also plans to fire, fine or reprimand certain employees for their roles in the scheme. While Dell did not name any people involved, it indicated that the investigation had reached high levels of management.

"We have taken what we believe to be appropriate actions with respect to personnel involved in this. That is up to and including terminations," said Don Carty, Dell's vice chairman and chief financial officer, during a Thursday conference call. The company would not say who had been fired in connection with the scandal or how many people it expected to terminate.

The investigation found that Dell staff adjusted account balances and provided incomplete or incorrect information to internal or external auditors, typically toward the end of the quarter, Carty said. There was "evidence that certain adjustments appeared to have been motivated by the objective of attaining financial targets," he said.

"Often these adjustments were relatively small; sometimes they did involve larger amounts," he added.

Though most of wrongdoing involved shifting around the reporting of revenue and liabilities, in one instance, there was fraudulent revenue booked that investigators had to reverse, Carty said. He did not provide details of that transaction, except to say it had occurred "overseas."

Dell began the audit in August 2006 after learning it was the target of an accounting investigation by the U.S. Securities and Exchange Commission (SEC). A huge team of as many as 125 lawyers and 250 accountants worked on the investigation, reviewing about 5 million documents and interviewing several hundred employees.

The SEC has met "frequently" with Dell executives throughout the internal audit, Carty said. "The restatement is certainly going to address the issues found in the investigation, but the SEC investigation is ongoing," he said.

Dell has not filed its quarterly financial statements during the course of this audit, but it now expects to file these statements by the first week of November, Carty said.

With the restatement, Dell hopes to put a dark chapter of the company's history to rest. Mired in the financial scandal, the PC maker has lost ground to rival Hewlett-Packard Co. over the past year, and in late January, former CEO Kevin Rollins stepped down to give founder Michael Dell a chance to revive his flagging company.

"All of us are very proud of Dell. We believe we're a world-class company and we're not terribly proud that we found one element of our company that wasn't world class," Carty said. "None of us at Dell like this."

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Ben Ames and Robert McMillan

IDG News Service
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?