Dell's Intel Bias Caused By Under the Table Cash?

swschrad writes "There's a story up on Reuters today saying Dell faces a class-action lawsuit for finagling the books to hide under-table money from Intel. The hidden cash, up to a quarter-billion dollars a quarter, is alleged to have been paid to keep competing CPUs out of Dell PCs. Dell, their accountants at PriceWaterhouse, company founder Michael Dell, and former CEO Kevin Rollins are all avoiding comment on the pending litigation."

Comments

Re:under the table?

[Anonymous Coward]

Discounts go to the company (shareholders). Under the table cash goes to the ones who arranged the deal (executives).

Bribes are not sustainable, see

[hirschma]

It is the same thing as if Dell was selling cocaine, and claiming that the proceeds from that were due to their super-fine computer business. People would be investing in them because they had such great metrics in the sustainable, legal business of selling computers. This is apparently not the case.

It also means that they will likely perform poorly compared to previous quarters. Stock value is about looking forward, not back - the price rises on what people think will happen next. In other words, speculation. Lots of folks will lose money because of these secret, and likely, illegal dealings. Hence the lawsuit.

Moreover, this behavior may open Dell to substantial unrelated lawsuits - which means that the folks in charge of Dell were neglecting their fiduciary responsibility to shareholders. Again, a perfectly valid reason for shareholders to sue.

I hope that Dell is gutted for this.

Re:under the table?

[Red Flayer]

Ahh, nope. I suggest you do some research on anti-monopoly laws, as well as US regulations of publicly traded companies. Companies in a position of market dominance (as Intel was at one time) are not allowed to pay resellers to not use competitor products. The money was likely paid under the table to avoid investigation in re: Intel paying to keep AMD out of Dell products; the other reason for the payments being on the sly was to manipulate stock prices, which is also illegal.

From AMD's complaint about Intel's unfair business practices, emphasis mine:

Intel's conduct has unfairly and artificially capped AMD's market share, and constrained it from expanding to reach the minimum efficient levels of scale necessary to compete with Intel as a predominant supplier to major customers. As a result, computer manufacturers continue to buy most of their requirements from Intel, continue to pay monopoly prices, continue to be exposed to Intel's economic coercion, and continue to submit to artificial limits Intel places on their purchases from AMD. With AMD's opportunity to compete thus constrained, the cycle continues, and Intel's monopoly profits continue to flow.

Consumers ultimately foot this bill, in the form of inflated PC prices and the loss of freedom to purchase computer products that best fit their needs. Society is worse off for lack of innovation that only a truly competitive market can drive. The Japanese Government recognized these competitive harms when on March 8, 2005, its Fair Trade Commission (the "JFTC") recommended that Intel be sanctioned for its exclusionary misconduct directed at AMD. Intel chose not to contest the charges.

It's pretty likely, IMO, that Intel used these unfair business practices in countries other than Japan.

Let alone the reporting issues for public companies that other posters have addressed.

Re:Only Intel?

[Red Flayer]

I could have sworn I've seen Dell selling machines with AMD CPUs.

You have. This is historical, not current activity -- and was stopped when AMD started filing complaints under Competition Law in many jurisdictions -- Japan, the EU, etc.

Re:Only Intel?

[Sylvak]

Too bad they waited that long... because in my opinion, amd was superior for a good while when they brought in the 64bit CPUs and dual cores (and before then too). Now that intel has caught up (even surpassed) AMD, Dell now offers AMD.

It's almost like Intel knew their product wasn't as good as AMD, and they were willing to pay big $$ to Dell in order to prevent the social masses from accepting AMD as the better product. But now, maybe Intel knows they have the better product, so they are not bending over for Dell anymore... someone gets pissed, and the story gets revealed.

This is too bad for AMD, cause Intel probably made huge $$ when Dell was only offering their product. That money probably got invested in R&D, and facilitated the rise of Intel's next generation product (core duo).