Dell faces investor lawsuit over Intel pact
By Our Corporate Bureau | 03 Feb 2007
New York: An investor lawsuit against Dell Inc. has accused it of artificially inflating profits "by secretly receiving approximately $250 million a quarter in likely illegal rebate kickbacks payments" from Intel in return for an exclusive deal to purchase Intel's microprocessors, class-action lawyer William Lerach told media.
Before it began buying processors from AMD last year, Dell had, for years used Intel microprocessors in all its computers.
Intel has denied the accusations, though analysts have said that it is widely known that Intel pays marketing fees to computer makers like Dell that feature its logo on computers and in advertising. While the legality of such payments is unclear, analysts say they should be clearly marked by both parties.
Dell does not provide a break down of such payments, known in industry parlance as 'reimbursements', in its financial statements. The lawsuit accuses the computer maker, founded in 1984 by Michael Dell while still in college, of improperly accounting for hundreds of millions of dollars in payments from its long-time partner Intel Corp.
Intel says the accusations and some of the claims appear to be a 'rehash' of similar complaints it by smaller rival Advanced Micro Devices Inc. "We deny the plaintiffs' allegations and plan to move quickly to defend ourselves," said Intel spokesman Chuck Mulloy.
The lawsuit comes in the backdrop of the US Securities and Exchange Commission investigation into its accounting. The US justice department is also reviewing the company's accounting.
