Dell Computer has announced it has identified several accounting errors, evidence of misconduct, and deficiencies in its financial-control environment. The struggling personal-computer maker stressed in a regulatory filing that its audit committee is working with management and its independent auditors to determine whether the accounting errors require any restatements of prior financial reports, and to assess whether the control deficiencies constitute a material weakness in Dell’s internal control over financial reporting.
In addition, the company said it will delay the filing of its annual report for its fiscal year ended February 2, 2007. Dell will also miss the allowable extension date of April 18.
“Management continues to be committed to resolving the issues raised in connection with the investigation, and regaining compliance with all SEC filing requirements and all NASDAQ listing requirements, as soon as possible,” the company stated in its filing. Furthermore, Dell said earlier that its audit committee was conducting an independent investigation into certain accounting and financial-reporting matters.
“As we move toward the conclusion of our investigation, we are committing the time and resources required to ensure a thorough and comprehensive review and resolution of all identified issues and the implementation of appropriate remedial measures,” said Thomas W. Luce III, who chairs Dell’s audit committee, in a statement.
In a separate announcement, the company said that on March 29, it delivered a blackout notice to its directors and executive officers informing them of a temporary suspension of contributions to the Dell Stock Fund within the company’s 401(k) plan and Dell Financial Services L.P. 401(k) plan, as a result of the delayed filing of the 2007 annual report.
In November Dell officials revealed that an informal Securities and Exchange Commission probe into certain accounting and financial-reporting matters had been turned into a formal investigation. The computer maker did not elaborate and did not identify the accounting matter. However, at the time, Dell spokesman Jess Blackburn told CFO.com in an E-mail that the probe did not involve issues related to stock-option granting practices.
In December Dell named Donald J. Carty vice chairman and chief financial officer, replacing James M. Schneider, who recently agreed to become executive chairman of Frontier Bancshares Inc. Then, in late January, founder Michael Dell returned as chief executive officer, while retaining the position of chairman. He succeeded Kevin Rollins, who took the helm three years ago.
The series of high-level executive changes comes as Dell struggles to sell its once-vaunted products. Bloomberg pointed out that sales of notebook and desktop PCs, which account for more than half of Dell’s revenue, declined over the holidays. It noted that Dell’s shipments fell 8.4 percent in the fiscal fourth quarter, compared with a 24 percent increase at competitor Hewlett-Packard, citing researcher IDC.