Dell Delays Filing Quarterly Report
Dell Inc. is once again rebooting its turnaround efforts.
On Monday, the world’s largest personal computer maker, struggling for more than a year to right itself, disclosed that it would delay filing its second-quarter results and suspend its stock repurchases amid growing doubts about the company’s financials.
Dell acknowledged possible misstatements in its results, adding that federal prosecutors in New York had subpoenaed documents back to 2002.
Dell said an informal Securities and Exchange Commission investigation -- together with an independent audit -- had raised questions about the company’s balance sheets that might affect previously stated results.
The news increased pressure on the company’s chief executive, Kevin Rollins. He is already under fire for losing ground to Hewlett-Packard Co. in the consumer market, customer service problems and the recall of more than 4 million laptop batteries because they posed potential fire hazards.
Monday’s disclosure came less than one month after Rollins downplayed the SEC probe to Wall Street analysts when he said Aug. 17 that he did not believe Dell would be materially affected.
On Monday, however, Dell said it had yet to determine whether it would be forced to restate earnings or whether changes would be material.
“As much as anything, we believe that today’s announcement is likely to further undermine management’s already fragile credibility,” Toni Sacconaghi, a senior research analyst at Sanford C. Bernstein & Co., wrote in an analyst note. “Today’s disclosure that the company also appears to have been remiss in understanding its own financial controls is likely to further unnerve investors.”
In a statement, founder and Chairman Michael Dell said, “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.”
One of the hottest stocks of the 1990s, the Round Rock, Texas, company has seen its business and share price tumble as its credibility has eroded on Wall Street.
Adding to investor discontent, Dell said it had postponed a scheduled Wednesday meeting with analysts.
That prompted complaints from observers, who said they were being deprived of a chance to discuss Dell’s potential comeback strategy and get answers to questions about the company’s third-quarter results.
“Today’s announcements contribute to an increasingly murky story at Dell,” wrote Bill Shope, an analyst with J.P. Morgan Securities Inc. “Clearly, the now second postponement to the company’s analyst meeting creates further uncertainty surrounding how Dell plans to correct its current woes.”
Dell’s stock fell 46 cents to $21.19 on Monday, near the 52-week low of $19.91 set July 21.
Some analysts are speculating whether the SEC investigation will result in a shake-up of Dell’s executive team, in place since 2002.
“Depending on the severity of these ‘misstatements,’ we cannot rule out the possibility of management changes associated with this issue,” wrote Citigroup PC and hardware analyst Richard Gardner.
But a company spokesman said Rollins, a onetime management consultant who was named CEO in 2004, continued to enjoy the full support of Chairman Dell.
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