Probe by Dell leads to profit restatement
Dell Inc. on Tuesday restated more than four years of results to cut profit by $92 million after a yearlong probe into its accounting found that financial reports had been manipulated.
The PC maker submitted new figures for earnings from fiscal 2003 through the first quarter of 2007, according to filings with the Securities and Exchange Commission. Dell had said in August it would file the paperwork by early November.
After the SEC began a review of its accounting in 2005, Dell began an internal investigation in August 2006 and found that employees tampered with results to meet quarterly earnings goals, sometimes at the request of senior executives. Michael Dell, who returned as chief executive in January, revamped the management team after the company lost the PC market lead.
“Now the company can focus on the real task at hand: winning back customers,” said James A. Grossman, a portfolio manager at Thrivent Asset Management in Appleton, Wis.
The changes reduce profit and revenue by less than 1% from prior totals, Dell spokesman Bob Pearson said. Net income was cut by $92 million, compared with previously reported net income of more than $12 billion, he said. That translates into a 3-cent drop in total earnings per share, to $4.75. Sales were cut by $359 million, down from a total of $196.2 billion.
Shares of Dell, based in Round Rock, Texas, rose 78 cents, or 2.6%, to $30.58 in extended trading after the report. They had risen 33 cents to $29.80.
The restatement is in line with Dell’s preliminary estimates. In August, the company said it planned to pare earnings by $50 million to $150 million, or 2 cents to 7 cents a share, and reduce revenue by less than 1%.
Dell’s investigation involved more than 375 people worldwide. They evaluated more than 5 million documents, conducted more than 200 interviews with employees, and reviewed thousands of journal entries and supporting files.
The probe found some teams changed accruals and reserves, estimates of expenses or losses that have occurred and haven’t yet been paid, to meet quarterly goals.
Some executives failed to report complete information and purposefully gave incorrect or incomplete data to auditors, Dell said in August.
Dell also said it planned to resume its share repurchase program after reporting third-quarter results Nov. 29.
