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Friday, August 17, 2007

Dell restates earning by up to $150M - Aug. 16, 2007

Dell Computer announced that it will restate earnings following recommendations by auditors that have investigated weaknesses in the company's internal control procedures.  Executives apparently had the flexibility to make accounting adjustments so as to achieve short term quarterly sales results.   

Dell said it expected to conclude that control deficiencies identified by auditors "constituted material weaknesses in the company's internal control over financial reporting."

The company added that executives, who it did not name, transferred excess accruals from one liability account to another and used excess balances "to offset unrelated expenses in later periods."

Dell restates earning by up to $150M

Many people were surprised to hear that the findings were not more severe.  Following other high profile financial scandals there was an expectation on the street that the problems at Dell would prove to be much worse than they appear to be.  There was a sense that the company would have to prepare for something akin to Mesothelioma treatments and instead only needed to take a few doses of cough syrup and antibiotics for a few days. In fact their shares on the Nasdaq rose 2.6 percent on Thursday while most of the financial markets around the world were still in a state of free fall as a result of problems in the mortgage industry.