Dell pays the price of cuddling up to Intel

Tinman Michael Dell has had to pay the price for his far too cosy relationship with the maker of chips, Intel.

The US watchdog, the Securities and Exchange Commission (SEC),  has asked Dell to write it a cheque for $100 million, and chief executive and founder Michael Dell another one for $4 million as part of a settlement.

In a joint press release, SEC said that Dell failed to properly disclose payments the company received from chipmaker Intel for using its products, rather than chips from rival AMD.

At one point these payments were so steep that they accounted for 76 percent of Dell’s operating income during the first quarter of its 2007.

In 2003 Intel paid nearly 10 per cent of Dell’s operating income. It was too much for even Intel and when the chipmaker cut its payments after Dell said it would begin using AMD’s chips.

SEC said that Dell failed to disclose this as the reason for a sharp drop in the company’s earnings in the second quarter of its 2007 fiscal year.

Christopher Conte, associate director of the SEC’s Division of Enforcement, said in a statement that Dell manipulated its accounting over an extended period to project financial results that the company wished it had achieved, but could not.

“Dell was only able to meet Wall Street targets consistently during this period by breaking the rules,” he said.

Dell and its CEO are neither “admitting or denying” the allegations in the SEC’s complaint because writing large cheques for no reason is what a “settlement” is all about.