The exclusivity payments constituted a steadily growing part of what Dell reported as its operating earnings, from 10 percent in fiscal 2003 to 38 percent in the fiscal 2006, then jumping to 76 percent in the first quarter of fiscal 2007, the S.E.C. said.
One more year and they could have quit selling poorly made computers altogether and made a business out of not using AMD.
My knee-jerk, emotional reaction is to say that this is America's corporate culture. Executives don't accept personal responsibility for anything, ever.
And now to the SEC or whomever accepted the M$4 settlement. This is ridiculous. What is the point of pursuing someone if not to end up with the equivalent of a "conviction." How is collecting cash from someone who admits no wrongdoing different from being bribed to find them innocent?
If I were in charge of the SEC, I would put findings of wrongdoing ahead of collecting cash penalties. Money is irrelevant to wealthy individuals. The one thing they cannot afford to spare is time. I would relentlessly pursue them with subpoenas, prosecutions, and the threat of actual jail time in order to force them to admit wrongdoing.
Settlements would involve community service, not money. Michael Dell needs to take some time off his business and read books to children in the library or perhaps help high school students with their math homework.
To follow this up: M Dell is worth about 12 billion. 4 million? The easy way to compare it is by portion, in which case he's just paid, say, a fine of five hundred dollars in terms of an average person. But rationally, that marginal 4 million will have even less affect on Dell's lifestyle than the $500 would on a blue collar citizen.
Sorry but Michael S. Dell's personal involvement in this seems minor considering Intel paid Dell 4.3 Billion (capital B for emphasis). This is bigger than just one or two CEO's.
TRWTF here is who the hell at Intel thought it was a good idea to be making seriously large cash payments to another company so that they would not use a competitor's product...really, guys? I thought you were smarter than that.
While I'll certainly admit that anti-trust rules have some gray areas where we could argue the relative utility of actions against monopolies or near-monopolies, this is not one of them. I doubt if even the most die-hard laissez faire types would argue against going after Intel here - if cheating like this is not forcefully dealt with the whole idea of a free market eats itself by its own asshole.
Did they seriously think they'd get away with this, or did they just figure the ultimate cost (cash spent + whatever penalties they are subject to once caught) would be worth it?
Um, yes. Unless anyone is being arrested for a criminal offense, than yes. They did think they would get away with it - and they have. Neither the words "criminal" nor "jail" were even in that NYT article.
Sad fact is that the entire fiasco was a simple business decision. No one goes to jail, and if they are caught they simply pay a fine.
Personally, I think every signature on their SEC fillings during that period should do jail time. But hey, what do I know.
This is a little weird. It's not 'padding' earnings, since Intel really did pay them the money, and they really did make it. What the SEC is saying is that they didn't tell investors that there was a risk, here. But the risk was "If we think using AMD is worth losing these payments, we'll do it."
That's not terrible. It's like saying "If we think our CEO is incompetent, we may hire someone else, even if we have to pay him more." Yes, that's a hidden risk to earnings.
No way. This is accounting fraud, plain and simple. It was a massive cash kick-back from a supplier that was disguised as regular earnings or revenue to keep Wall St. expectations and Dell's stock price up.
Who knows how much Dell and other managers in the know profited from this by cashing out stock or options for years while the rest of the investing public held the bag? They should probably be in jail.
But the point was that Intel was paying them, presumably in order to not do something that would harm Intel. So it makes sense to keep accepting that payment until the costs exceed the benefits.
Are you contending that Dell would not have recouped any of that rebate money by working with AMD? If so, why would Intel pay so much? In theory, just paying Dell $1 would be enough.
It's padding because if you read closely, toward the end of the article, Dell was clearly fine-tuning the rebate amount at the end of each quarter so it would match whatever target they had.
Intel played along and knew why Dell was asking for specific rebate amounts.
Ethics and Values
The Board and management are jointly responsible for managing and operating Dell’s business with the highest standards of responsibility, ethics and integrity. In that regard, the Board expects each director, as well as each member of senior management, to lead by example in a culture that emphasizes trust, integrity, honesty, judgment, respect, managerial courage and responsibility.
I am honestly amazed by the capacity these people have to spew bullshit. Apparently that was his answer to this:
Mr. Dell said, “We are pleased to have resolved this matter. We are committed to maintaining clear and accurate reporting of our periodic results, supporting our customers, and executing our growth strategy.”
How is it possible to say this with a straight face? I find this comment very insulting. Compare this to, say, the Toyota CEO.
Seems that Intel rebated Dell, rather than give them better pricing off the bat, otherwise they would have had to offer the same pricing to everyone else. By making it a rebate, they avoided this.
Intel would only have to offer the same "Dell-special" price to folks who have the appropriate contract terms. (Dell doesn't buy off the standard price sheet, if Intel even has one.)
However, there may be companies that have a "no one gets a better price" deal. This may give rise to a breach of contract suit or possibly fraud.
And then there's the US govt. The law says that the US govt has to get the lowest price.
Of course, Intel can give volume discounts to Dell that the govt doesn't get if the govt doesn't do the same volume, but if Intel told the govt that it was getting the best deal and Dell's deal was actually better ....
I know about copyright. I tend to ignore it when I believe that breaking it would have no negative effect nor consequence. Your sense of morality may vary.
Has there been any information released on why Dell was doing so badly in 2007 when seemingly everyone else was doing well? Is Intel paying other companies to be exclusive which is inflating their earnings? Makes you think twice about the top PC makers and who's really #1. Would love to read more about how/why it jumped to 76 percent.
One more year and they could have quit selling poorly made computers altogether and made a business out of not using AMD.