Dell hell continues (and XBox 360 laptop)

Welcome to IT Blogwatch, in which Dell delays its Q2 earnings statement. Not to mention the XBox 360 laptop hack...

Ben Ames bring us this:

Dell Inc. has delayed filing its quarterly earnings report with the U.S. Securities and Exchange Commission (SEC) and may have to restate past earnings statements, the company announced today.

Dell's board of directors began an internal financial audit after learning in August 2005 that the SEC had started an investigation of the company's revenue-recognition and accounting practices for past fiscal years. Dell executives acknowledged the probe on Aug. 17 while announcing preliminary results for the second quarter. Since then, Dell learned of a second investigation when the U.S. attorney for the Southern District of New York subpoenaed the company's financial reporting documents for the years from 2002 through today.
...
Dell's internal audit revealed that the company may have misstated prior financial reports, including accruals, reserves and other balance sheet items ... Dell earned only $502 million in profits for the second quarter of 2006, a drop of 51% from the same period last year ... The company has also suspended its share-repurchasing program and a meeting with analysts scheduled for Sept. 13.

GMSV's John Murrell adds:

As an ignominious summer wrapped up under the clouds of lousy earnings and a massive battery recall, Dell execs and stockholders must have been asking, "Can it get any worse?" Today, they were answered in the affirmative ... The company disclosed the accounting probe last month, but played down any material impact. Now it's not so sure ... Analysts say stockholders are in for continued rough sledding.

But Douglas McIntyre says the market's overreacted:

The market decided to hammer Dell because it will delay filing its earnings. Big deal. Dell is down 3.5% to $20.90. By 10:30, the stock had traded about 20 million shares.
...
Dell has much more significant problems that a potential restatement. Slow growth ,shrinking margins, and poor customer service are at the top of that list. But, the market has already discounted the shares of that. Much as Apple's shares quickly recovered when the company said it had an options problem and the HP probe has had little affect on the company's share price, Dell's delayed filing is not likely to change anything.

Shel Israel points to a question of trust:

The company has also suspended its stock buyback program, which I've suspected has prevented the steadily sinking stock price to completely tank. This announcement comes shortly after my note that in some areas, Dell has apparently begun to do the right things, such as how it has handled the battery recall and investing $100 m in customer support ... In any case,the news does little do instill trust in the ailing computer-making giant.

Slashdotters discuss:

fredistheking: Not suprising. Dell had a tendency to dump computers at the end of every quarter to inflate volume. This went on for over 2 years up until a few months ago ... The whole time this was happening I never could figure out how Dell was actually making money on these systems when they were dumping them for 25%-30% less than normal price.

NDPTAL85: This could end up benefiting Dell in the long run. With the share buybacks suspended because of the investigations when that suspension is lifted the negative news might have caused the share prices to have decreased making them cheaper for Dell to buy back and thus increasing the profit they can make when they sell them again years from now.

eshefer: Close up shop ... a reference to michael dell remarks from 1997 to the question a reporter asked him: "what should apple do?" his answer was "apple should close up shop and return the money to the shareholders".

Dell's increasingly pointless pseudo-blog has nothing to say:

[As usual]

Buffer overflow:

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And finally...  Ben Heckendorn's XBox 360 laptop

Richi Jennings is an independent technology and marketing consultant, specializing in email, blogging, Linux, and computer security. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. Contact Richi at blogwatch@richi.co.uk.