An Anniversary Dell Is Not Celebrating
Before that conference call, Dell's biggest problems were declining sales growth, declining profits and declining market share. Since that conference call, Dell has parted ways with its then-CEO, Kevin Rollins, top executives including Joseph Marengi, John Medica, Ro Parra and Schneider himself. The informal SEC investigation became a formal investigation, the U.S. Attorney for the Southern District of New York launched its own probe, former Dell director Thomas Luce left an education post in the Bush Administration, returned to Dell and headed an Audit Committee investigation. Luce's probe has found "accounting errors, evidence of misconduct, and deficiencies in the financial control environment."
The inquiry continues.
The audit committee still doesn't know if Dell will have to restate several years worth of earnings, or, if it does, how deep those restatements will be. An investor lawsuit charged that Dell may have misled the market over as much as hundreds of millions of dollars of payments from Intel, a charge Intel said appeared to have been made up but one on which Dell has not commented. (Dell never comments on lawsuits.) One analyst has speculated Dell may have overstated earnings as a result of how it accounted for warranty revenue.
From top to bottom, Dell executives and employees refuse to talk about the accounting investigations. Investors have been handcuffed in performing routine due diligence on Dell, because Dell has not filed its required quarterly and annual financial reports with the SEC, citing the ongoing investigations.
With Michael Dell back at the helm as CEO, the company is in the midst of a major make-over. After years of touting its direct sales, Dell is now openly courting channel partners as it attempts to grow its $4 billion annual sales through solution providers.
But solution providers, like investors, are handcuffed and unable to determine the extent of the risk Dell faces because of the accounting investigations. Like everyone else outside of the SEC, federal prosecutors and the Dell audit committee, resellers and solution providers are left to guess what the fallout may be.
Next year may be different, but for now this is an anniversary Dell is not celebrating.