Dell Earnings Slump Amid SEC Probe

Dell Inc. on Thursday posted disappointing second-quarter earnings amid a regulatory probe. The company also announced an expanded partnership to put Advance Micro Devices Inc. computer chips into a new line of Dell servers and desktop PCs as early as next month.

The deal was revealed as the Round Rock-based company missed Wall Street expectations in which second-quarter profit fell 36 percent to $605 million, and days after it voluntarily recalled 4.1 million potentially flammable batteries supplied by Sony Corp.

Dell also said Thursday it was cooperating with an informal investigation by the Securities and Exchange Commission over "accounting and financial reporting matters for certain past fiscal years." Dell said it did not believe there were any issues, it also was conducting its own internal investigation.

In its last earnings report in May, Dell said it would start using AMD processors for specialized computer servers used mainly by large businesses. It ended a long-standing exclusive relationship between the Round Rock computer maker and Intel, AMD's chief rival.

In Thursday's announcement, Dell will offer Dimension desktop PCs with AMD processors net month, and several new server models using AMD chips by the end of the year.

The news was tinged by earnings that fell well short of Wall Street expectations and a preliminary investigation by government regulators.

Dell reported earnings of 22 cents per share on sales of $14.1 billion -- below the earnings of 32 cents per share on sales of $14.2 billion the company had initially forecast and 10 cents less than analysts polled by Thomson Financial had expected. In the same period a year ago, Dell had earnings of 38 cents per a share on sales of $13.4 billion.

"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," CEO Kevin Rollins said. "Key actions include accelerating cost initiatives, increasing investments in service and support, and better pricing management."

The results and the SEC probe were announced just as the market closed. Dell shares rose 7 cents to close at $22.80 on the Nasdaq Stock Market.


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