An internal investigation at Dell has found evidence of misconduct and accounting errors, forcing the company to delay filing its annual earnings report with stock market regulators, it said Thursday after the U.S. stock market closed.
Once the world’s largest sellers of notebook and desktop PCs, Dell has stumbled in recent quarters, watching profits fall as the company struggled with an accounting investigation by the U.S. Securities and Exchange Commission (SEC). In January, founder Michael Dell ousted his successor Kevin Rollins and returned as CEO in an attempt to reverse the company’s fortunes.
Now Michael Dell will face an even tougher challenge. One of his first moves was to win a reprieve when the Nasdaq stock exchange threatened to de-list the company’s stock because it had missed three deadlines for filing its quarterly earnings reports with the SEC. The company now says it will miss the extended date, as well. Dell will delay filing its Form 10-K for the fiscal year ending Feb. 2 beyond the original deadline of April 3 and the extended deadline of April 18.
Dell did not say what sort of misconduct it had found or who had committed it. In a brief statement, the company said only that an audit committee it had assigned to investigate the SEC charges was not yet finished with its task, but had “identified a number of accounting errors, evidence of misconduct, and deficiencies in the financial control environment.”
Dell management has not yet determined whether prior earnings will have to be restated to correct those errors, the statement said.
One hint to the nature of the misconduct may come from a lawsuit filed Jan. 31 by shareholders, alleging that a small circle of executives arranged for Dell to accept payments from Intel in exchange for using only Intel processors in Dell PCs. The lawsuit also said the managers had used inside information to reap multimillion dollar profits by selling stock options at auspicious times. The lawsuit was filed in U.S. District Court in Austin, Texas.