Dell Faces Accounting Probe, Delays Q2 Results
Dell Inc. has delayed filing its fiscal second-quarter financial report and suspended its share repurchase program because of an ongoing federal accounting probe. It was the latest in a series of setbacks for the world's largest PC maker.
The Round Rock, Texas, company said it could not file the quarterly report because of "questions raised" by an informal Securities and Exchange Commission investigation into accounting issues and a subsequent internal probe.
The company also said the U.S. Attorney for the Southern District of New York had subpoenaed documents related to its financial reporting from 2002 to the present.
In a statement, Dell said investigations have shown that the company may have misstated prior financial reports, including issues relating to accruals, reserves and other balance sheet items, which may affect previously reported financial results.
Dell shares dropped 46 cents, or 2.12 percent, to close at $21.19 on the Nasdaq Stock Market. That is near the lower end of their 52-week range of $18.95 to $35.25 and is down 28 percent since the end of 2005.
Dell said it has not yet determined the material impact of any of the accounting issues.
"We are fully cooperating with the investigations and working to resolve any and all issues raised in connection with those investigations as quickly as possible, and we will take any appropriate remedial or corrective actions to address any problems," Chairman Michael Dell said in a statement.
The company said it plans to file the second-quarter report as soon as possible but didn't offer a more specific timetable. Third-quarter earnings are scheduled to be posted Nov. 16.
It's believed to be the first time Dell has ever missed a quarterly filing, said spokesman Bob Pearson, who declined to comment beyond what was in the news release.
"This particular news couldn't come at a worse time for Dell given all of the problem," said Tim Bajarin, analyst with Creative Strategies.
Dell grew to prominence on a patented, direct-sales model to consumers and businesses but has been rattled in recent months as it revamps its customer service programs and deals with fierce competition from rivals such as Hewlett-Packard Co.
Dell first disclosed the accounting probe in last month's quarterly report, in which revenues plummeted 51 percent.
At the time, Dell officials played down its significance and said they didn't expect it to have any material impact on the company's bottom line.
Also last month, Dell issued a voluntary recall of 4.1 million potentially flammable laptop batteries made by Sony Corp.
Dell also postponed its annual analysts meeting planned for Wednesday in New York. The company will host two Web conferences with Dell and Chief Executive Officer Kevin Rollins to provide a company update and show new products.