Dell finds results manipulated, will restate earnings

DALLAS — Computer maker Dell said Thursday it will reduce more than four years' worth of earnings by up to $150 million after an internal investigation found the company misled its auditors and manipulated results to meet performance goals.

The struggling company said profit for the restatement period will be reduced by $50 million to $150 million, or 2 to 7 cents a share.

The largest cuts in quarterly profits were expected to be in the first quarter of fiscal 2003 and the second quarter of fiscal 2004, each lowered between 10 and 13 percent.

In total, Dell will restate all of fiscal 2003 through 2006 and the first quarter of fiscal 2007.

The investigation, which began last August and evaluated more than 5 million documents, "identified evidence that certain adjustments appear to have been motivated by the objective of attaining financial targets," Dell said.

The company added that unspecified terminations, reassignments, reprimands, increased supervision, training and financial penalties either have resulted or will.

Since the investigation was first revealed, Dell's executive team has undergone big changes, including the departure of former Chief Financial Officer James Schneider and the return of founder Michael Dell as chief executive.

A Securities and Exchange Commission (SEC) investigation into some of Dell's accounting and financial-reporting practices is ongoing, the company said.

One analyst said the financial impact appeared minimal, given Dell's multibillion-dollar size.

"The magnitude of this stuff is very small; it's not a big number," said Roger Kay, president of Endpoint Technologies Associates. "I don't think it's anything that's going to rise to the level of criminality, but then again, I'm not the SEC."

Dell said the findings would not have a material impact on second-quarter results, which are expected Aug. 30.

Dell has issued only preliminary financial results for the four most recent quarters and hasn't filed its annual report for the fiscal year that ended Feb. 2 because of the investigations.

With the internal inquiry complete, Dell said it expects to file the past-due documents by the first week of November. Its annual shareholders meeting is Dec. 4.

Dell still faces shareholder lawsuits, and federal prosecutors in New York subpoenaed documents on the company's financial reporting since 2002.

Dell shares dropped 37 cents, or 1.4 percent, to close at $25.93 before the announcement was made. The stock rebounded 42 cents in after-hours trading.