Dell finds evidence of accounting misconduct

Dell on Thursday said it had found evidence of misconduct and errors in its accounting amid investigations into the computer maker's financial results. The shares fell as much as 8 percent in extended trading.

The world's second-biggest personal-computer maker will miss an extended deadline for filing an annual report. Officials are still trying to determine if Dell will need to restate financial results, the firm said.

The remarks heightened concern among investors after an investigation by the Securities and Exchange Commission, started in August 2005, was escalated into a formal investigation in November. Dell has said the investigations indicated possible errors related to accruals and reserves — estimates of expenses or losses that have occurred but haven't been paid out yet.

"People will tend to assume the worst," said Mike Green, a fund manager at Benham & Green Capital Management in La Jolla, Calif., which owns Dell shares. "Let's get to the bottom of it and let's get there quick."

Shares of Dell, which also is being investigated by the Justice Department, fell as much as $1.89 in extended trading. The stock had risen 4 cents to $23.39 during the regular session.

The PC maker, which has reported only preliminary results for the past two quarters, said it will miss the April 3 deadline for the annual report and the extended date of April 18.

The audit committee found a "number of accounting errors, evidence of misconduct, and deficiencies in the financial control environment," Dell said in a statement. The committee is being led by Thomas Luce II, a former Dell director and lawyer who returned to the board in September.

The committee is still working with management and independent auditors to determine whether the errors require financial restatements for earlier periods. The company had no further comment beyond the release, spokesman Bob Pearson said.

"You don't get a lot of detail from this release," said Chris Baggini at Gartmore Global Investments in West Conshohocken, Pa., which doesn't own Dell shares. "I can't imagine the reaction is going to be positive."

SEC spokesman John Heine said the agency had no comment.

Dell also told executives and directors Thursday they won't be able to buy or sell the company's shares until the company files its annual report for the year ended Feb. 2.

Dell already faces challenges to revive sales and profit after losing the PC market lead last year to Hewlett-Packard. Founder Michael Dell retook the title of chief executive officer in January after ousting his protégé, Kevin Rollins. Longtime finance chief James Schneider resigned in December.

Dell's shipments fell 8.4 percent in the calendar fourth quarter, while Hewlett-Packard's grew 24 percent on demand for notebook PCs, according to researcher IDC.

Michael Dell said in a statement March 1 that fixing the company will take time. He plans to devise new approaches to manufacturing and distribution to help regain the price advantage the company once held over competitors including Hewlett-Packard, which copied the innovations pioneered by Dell to offer lower-priced systems.