Dell's Intel Bias Caused By Under the Table Cash? 256
swschrad writes "There's a story up on Reuters today saying Dell faces a class-action lawsuit for finagling the books to hide under-table money from Intel. The hidden cash, up to a quarter-billion dollars a quarter, is alleged to have been paid to keep competing CPUs out of Dell PCs. Dell, their accountants at PriceWaterhouse, company founder Michael Dell, and former CEO Kevin Rollins are all avoiding comment on the pending litigation."
Only Intel? (Score:4, Insightful)
Re:under the table? (Score:4, Insightful)
Re:under the table? (Score:4, Insightful)
for that much money? Duh! (Score:2, Insightful)
Re:Only Intel? (Score:2, Insightful)
Due to their Tech support Script monkeys (I told you I don't have Windows installed five times now...) the over all quality drop (You need a new HD for that Computer you just bought 4 months ago...) and their lackluster cookie cutter builds, (Yay I have to reinstall Windows just to uninstall all this crap that's pre-loaded, wait I don't have a Windows disk...) I have really stopped recommending them to people looking for a new computer. I wish I knew who I could recommend now without the guilty feeling.
What's artificial about the profits? (Score:2, Insightful)
1) Well, if the USD250 mn received was accounted for (thus "inflating profits") how can it be secret? If the rebate was illegally pocketed by execs, that would be "under the table".
2) Last time I checked, it was not "illegal" to offer quantity discounts/rebates to large customers. Hell, according to the law firm's logic, buying at CostCo is illegal because they offer quantity based rebates!
3) All criterea for revenue recognition were fulfilled - the amount was a revenue receipt and was actually received. How can then it amount to "artificial inflation of profits"?
The law firm is just out to get some free publicity and slashdot's editors are too willing to help.
Re:under the table? (Score:3, Insightful)
Well, while I think such a payment should be used to reduce the cost of the components and as a result widen the profit margin (and hence the taxes paid) Dell may want to account for it differently. They could, for example, be offering copay money to advertise Intel chips; which would be a different accounting treatment.
In addition, if Intel discounts then they will have to offer the same discount to any other company that they have a "best price" contract in place; so a discount will cost more than just what they give Dell. Therefor, they sell at list and pay cash to lower the price without offering a "discount."
Re:under the table? (Score:5, Insightful)
Re:Who is filing the suit? Which investors? (Score:2, Insightful)
Lawyers.
Consider the source (Score:5, Insightful)
This is the firm that's made a tidy living sueing the hell out of public companies whose stock drops suddenly. Guess the stock market is doing so well that they've decided to sue for prices going in the upward direction as well. Usually the target settles out of court because winning the legal battle would cost them more. A few years back they sued a company whose stock I own. In that case the company fought them off, but it cost me and the other stockholders (in whose names Lerach was sueing, thank you so much) several million. May Lerach and his ilk rot in hell.
Re:Huh? (Score:3, Insightful)
If you have a dominant position in the market, it may violate antitrust law.
Selling at a low price is fine, always. But if you have a dominant position in the market, there are things that you aren't allowed to do:
You can't sell below cost, called dumping. The tactic is to bankrupt the competition and raise prices after they're gone.
You can't bundle products together so as to create a monopoly in a new area by tying to products from an existing monopoly.
You can't punish customers for buying from a competitor. Reward them for buying from you, yes. Punish them for buying from the other guy, no.
If you don't have a dominant position in the market, you can do those things. Sell below cost, buy market share, and the competition will have its chance when you run out of money. Sell unpopular products by bundling them with popular products, and watch your popular products become less popular. Require exclusive contracts, and watch customers switch to vendors willing to satisfy customer needs. You can do these things because market forces will correct attempts to manipulate the market. Under normal conditions, the market will reward efforts to compete and punish efforts to inhibit competition.
But a company can have a commanding position in a market, such that they aren't hurt much by tactics which reduce, inhibit, or eliminate competition. That's where antitrust laws come in. If you can get away with actions that stifle competition, then you are a monopoly in the legal sense, if not the pedantic sense beloved by shills. That's how the court determine if you are a monopoly. If you can raise prices without losing sales, you may be a monopoly. If you can afford to sell below cost until the competitors are out of business, then you may be a monopoly. If you can force unfavorable contract terms on your customers without losing them, you may be a monopoly.
Rewarding Dell for buying from Intel is one thing, and rewarding Dell for helping drive AMD out of business is another. The distinction between gaining sales for Intel and punishing sales by AMD can be subtle, and that's what the courts will wrestle with.
Re:Bribes are not sustainable, see (Score:3, Insightful)
* Dell is nailed for cooking the books - it appeared to everyone that they were doing great SELLING COMPUTERS. It isn't just about doing well.
* Intel and Dell are nailed on uncompetitive practices.
* Intel is nailed for monopolistic practices, with Dell as an accomplice. Might be the same thing as the previous bullet, IANAL.
No matter what, someone is going to hang. Publicly traded companies are about transparency, and this was about as opaque as it comes. The point is that they could not have accounted for this properly - and that's a red flag that something stinky was going on.
I'm sure that HP is just thrilled about this. I think that you'll see more AMD and less Itanium over there right quick.
Re:why under the table? (Score:0, Insightful)
Erhm.. Dell isn't a market, its a company that competes in one.
Dell Competes with HP/Compaq, Sony, Toshiba, Lenovo etc.
Intel making a deal with Dell, hardly stopped the other more that 3/4 of the market from using AMD.
Now if intel was making these deals with all of Dells competitors, then AMD would have a legit bitch.
Most likely, Like Microsoft back during the Clinton era, Intel forgot to pay their DNC bribe money.
Re:under the table? (Score:2, Insightful)
That's the nature of a government which has too many laws. Each law is selectively enforced (abused) only when it serves the convenience of those who write the rules and are in control.
> It's a legitimate way of doing business
Only insofar as the people conducting legitimate insider trading are in the good graces of those who hold the authority to order investigation and prosecution.
That's why Martha Stewart received such a light sentence. She fell out of the good graces of some people but retained the favor of others who kept her from sitting in prison for much longer.