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AIA

Dell plays down impact of 2003-06 restatements

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31st Oct 2007
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Texas-based PC manufacturer Dell this week filed restatements of its 2003, 2004, 2005 and 2006 annual results to reduce revenue and profit figures that were inflated in the original accounts. John Stokdyk reports.

A Dell spokesman was widely reported as claiming that the cumulative reduction of earnings amounted to $92 million over the four-year period, when the company's net income was $12 billion.

But a quick review of the official restatement shows net income (profit) figures were overstated by $106 million during that period and overall revenue figures (turnover) were adjusted by a cumulative total of $463 million. Tellingly, the cumulative figure for revenue recognition adjustments was $237 million over the four-year period.

The yearly effect was typically a 1-3 cent addition to the earnings per share figure, but having spent more than $200 million on the investigation into the accounting irregularities and beefed up its internal controls as a result, Dell's commitment to transparency does not appear to extend to its dealings with journalists.

The full 10-K filing report is available from the SEC and with the latest filings, the company said in an official press statement it expected to achieve compliance with NASDAQ's continued listing requirements.

However, the company also indicated that it and several current and former executives are parties to a number of shareholder lawsuits arising from the accounting irregularites. Four class action suits have been consolidated into a single "Dell Securities Litigation" case in the Western District of Texas, Austin division. If and when the cases reach court, the restatements and their financial impact are likely to be scrutinised in more detail.

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