Dell Accounting Probe Resolved: Battle of the PC Makers Continues
Yesterday Dell announced the results of its year long accounting probe and admitted that finance staff misstated earnings in order to meet quarterly performance targets. The company will now have to restate four years worth of earnings and has already taken steps to fire or reassign those involved in the mess. CEO Michael Dell will stay to lead the company.
This could be seen as bad news -- deceit certainly can't be good for investor confidence -- but there is actually a fairly strong upside to the conclusion of this sorry episode. A Business Week article today quotes Brent Bracelin, a vice-president and senior research analyst at Pacific Crest Securities:
"The affirmation of Dell's command, combined with the promise of a return to quarterly earnings calls and the relatively small amount of lost profits--Dell earned more than $12 billion during the period covered by the restatement--will give investors more transparency and could be cause for relief."Dell certainly needs some good news as No. 1 computer maker Hewlitt Packard reported a 30% jump in third quarter profits to $1.8 billion this week. The Times of London credits CEO Mark Hurd, who has deftly managed operating expenses and increased margins. (For more information about which segments of the business contributed most to the strong numbers, check out this Business Week article.)
Drawing a different lesson from the accounting scandal, The Motley Fool highlights the fact that Dell's deceit was aimed at meeting Wall Street targets and insists that the game of making and meeting quarterly forecasts pushes companies, if not all the way to dishonesty, than at least away from focusing on the long-term health of their businesses. Author Tim Beyers encourages Mike Dell to make a pledge:
It all starts with a single phrase, Mike. Say it with me: "I will never again issue quarterly guidance so long as I am the CEO of Dell."Amid all the commentary on the HP v. Dell duel, the Times reminds us not to lose sight of black horse competitor, Lenovo. The No.3 computer maker is "eyeing Packard Bell for a possible acquisition that would radically ramp up the Chinese group's presence in Europe."
The Times concludes: "nobody among the top-tier of PC makers can afford to rest on their laurels."