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They weren't playing fair with us... sigh
Written by Daniel   
Saturday, 03 February 2007 07:14
Dell Faces Lawsuit Alleging Secret Kickbacks From Intel
Marcus Yam (Blog) - February 2, 2007
Dell is accused of secretly receiving illegal rebate kickback payments from Intel in return for an exclusive deal

Dell has received a class action lawsuit from investors accusing the company of improper accounting in its longtime partnership with chipmaker Intel Corp., reports the Wall Street Journal. Specifically, the lawsuit alleges that Dell's profits were inflated by hundreds of millions of dollars in “secret and likely illegal” kickbacks by Intel to ensure the exclusive use of its chips inside Dell computers. The lawsuit also accuses Dell of misleading investors about “serious accounting, quality and customer-service problems.”

The 251-page complaint filed on Wednesday coincided with the surprise resignation of Kevin Rollins -- who at the time held the title of CEO at Dell. Rollins, along with now CEO Michael Dell, were both named as participants in the suit. The complaint states that 15 senior people at Dell were privy to the information about the alleged secret agreement with Intel.

According to the lawsuit, Dell was receiving as much as $1 billion a year, or approximately $250 million a quarter, from Intel for guaranteed exclusivity. The money is said to have been spread unevenly throughout the four quarters to reduce Dell’s reported costs of goods sold. The complaint alleges that payments were made by Intel near the end of Dell’s fiscal quarters, having a “direct, material impact” on reported operating profits or profit margins.

“The numbers of more than a $1 billion (annually) of what I would call marketing incentives (paid by Intel to Dell) is probably right on track,” said ThinkEquity Partners analyst Eric Ross to Reuters. “They don't disclose that at all, either of them, so it's hard to really dig it out.”... More

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