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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."
I could have sworn I've seen Dell selling machines with AMD CPUs.
(IANAL)
A large technology company trying to make sure the competition stays out of the game by pushing the retailers? Preposterous! Next you'll tell me that Microsoft is trying to rule the world by forcing everyone on the planet to use their products.
Under the table money from Intel?
Wait... is that why the Opinion Center colors are so... I dunno... currency like?
Reuters gets slashdotted... Slashdot gets Intel'ed!
I for one welcome our--- AGH! [tackled and beaten to death by slashdotters]
Sounds like a great article for the Intel Opinion Center!
Yea but a publicly traded company has to reveal income. If Intel was actually giving them cash instead of just lowering their prices then this income has to be accounted for legally
An accountant, a Lawyer, and an Engineer are all interviewing for a CEO job. As part of their respective interviews, the Board of Directors asks them what 2 + 2 is.
The Lawyer answers that it generally considered to be 4, but there could be precendants in which that answer may vary.
The Engineer takes out a slide rule, works for a bit, and answers that it is 4.000000000000000000000000000000000000000
The Accountant looks at the Board and asks, "What would you like it to be?"
If brevity is the soul of wit, then how does one explain Twitter?
Discounts go to the company (shareholders). Under the table cash goes to the ones who arranged the deal (executives).
One way in which a monopolist controls the market is with public price matching. For example, if Intel publishes all their pricing, and guarantees that anyone going exclusively Intel will not pay more than say, Dell, then if Intel drops the price to Dell, they have to refund money to other all-Intel shops... perhaps Apple or other players that agreed to go all Intel to get price breaks.
If Intel gives Dell a 250m rebate, then they are actually charging below the price, and would have to match it elsewhere. However, by hiding the rebate, they can keep charging Dell a book value and collecting the premium elsewhere.
When big players negotiate big contracts, they often put in protections to not be worse off than the competition. I would expect the deal to be illegal because by not disclosing it, they MAY be in material breach to other companies. Further, Intel has signed consent decrees with the Feds over alleged anti-trust violations, and non-disclosed payments to keep competition out may violate those agreements.
This isn't a local computer shop contracting with a wholesaler, these are two Fortune 50 companies, sometimes they have arrangements covering them.
Also, what if a state government agreed to a deal where Dell was the exclusive provider in exchange for cost-plus accounting. Dell would bill on the reported cost, plus profit margin, and then collect the rebate.
There are a bunch of reasons why this might be illegal because it is potentially defrauding other companies IF their deals are dependent on Intel or Dell's pricing structure.
Financial statements are public and they never include per-unit prices for raw materials and parts. They include a lump sum "Cost of Goods Sold" which includes the total price for all raw materials and parts consumed per business (if it's broken down that way). If Dell is worried that other companies can read their financial records they have more serious problems to worry about.
Mmmm.. Donuts
It's called predatory pricing. Mainly it's when a larger company with more marketshare prices their products below profitability in order to bankrupt their competitor.
It's one of the main reasons that straight free markets don't work.
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.
From AMD's complaint about Intel's unfair business practices, emphasis mine:
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.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Actually, that's naked insider trading. It's more like "we're investing in a new company X, and we could send them your way as their systems vendor, that is, with our cash. So what about that purchasing deal we were talking about before?"
Done with slashdot, done with nerds, getting a life.
This is the firm that's made a tidy living sueing the hell out of public companies whose stock drops suddenly. Guess the stock market is doing so well that they've decided to sue for prices going in the upward direction as well. Usually the target settles out of court because winning the legal battle would cost them more. A few years back they sued a company whose stock I own. In that case the company fought them off, but it cost me and the other stockholders (in whose names Lerach was sueing, thank you so much) several million. May Lerach and his ilk rot in hell.
Bias-free semiconductors never really took off.