Dell (DELL) says it uncovered errors and misconduct in a review of its accounting practices and past financial statements. The stock dropped by as much as 7% after the market closed. But, the company had already telegraphed that it had issues and the Justice Department and SEC are already in the house.
Those to blame have almost certainly left the company. Both the CEO and CFO who held their jobs during the period in question are gone.
But, the stock should not be moving because there may be restatements of past financials. They may not even have any cash affect.
Dell’s shipments of PCs dropped 8.7% globally in Q4 06 compared to the same period the year before. Hewlett-Packard’s (HPQ) shipments rose 24%. The worst part about this is that no one at Dell has come up with an explanation of why business is bad and how it will be fixed. Is it customer service? Are the machines from the competition sexier? Does Dell sell to a portion of the marketplace that is shrinking.
Dell’s shares are toast until it can explain what course it will take to try to reclaim the position as the world’s No.1 PC company. Accounting has nothing to do with it.
Douglas A. McIntyre
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