*NEWS*DELL SUED FOR INTEL KICKBACKS

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*NEWS*DELL SUED FOR INTEL KICKBACKS

 user 2007-02-06 at 10:23:00 am Views: 53
  • #17374

    Dell sued for Intel kickbacks
    “Dude, you got a lawsuit.” – Investors are filing suit over Dell’s alleged kickbacks from Intel.
    It
    seems the resignation of Dell’s former CEO Kevin Rollins wasn’t without
    cause – news has hit the wire hard today about a lawsuit filed against
    the computer manufacturer on behalf of its investors. Apparently, all
    of the mean-spirited talk by AMD that Dell was being given kickbacks
    for remaining exclusive to Intel weren’t really made up after all.The
    purported kickback scheme is something that had never really been
    proven, but often theorised. As long as Dell kept its products
    exclusively Intel-based, Intel lopped off a bit of the chip cost each
    quarter for the next quarter’s order. It’s estimated that the kickback
    was a whopping $1 billion per year – enough incentive to keep Dell
    quite happy until AMD’s original monopoly lawsuit.Though offering a
    bulk sales discount is far from uncommon practice in any industry, the
    break that Intel gave greatly undercut its offerings to much of the
    rest of the market, and allowed Dell to make systems that were far
    cheaper than competing products. This promoted unfair advantage to both
    companies, which used the breaks the other provided to minimise
    competition and increase their own brand strengths.As interesting as
    the monopoly aspects are, though, what’s more interesting is the new
    suit – it’s brought on behalf of investors, not competitors. Investors
    in Dell are worried about how the kickbacks artificially increased the
    company’s profits – since they were undisclosed (they just reduced the
    cost of buying parts, so get hidden in the paperwork), they made the
    company look better than it actually was. Now that the exclusivity is
    over, so are the kickbacks – a reality which could send Dell’s stock
    for a tumble as its costs soar.The suit names both Michael Dell and
    Kevin Rollins, as well as the company proper and its accounting firm.
    By the sound of it, it’s not so much about the deal existing as it is
    about how the transaction was (or wasn’t) reported, which could have
    pretty big consequences to the company’s bottom line.