Dell Discloses SEC Probe, 2Q Profit Drop

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The New York Sun

Dell Inc. yesterday reported a second-quarter profit that fell 51% from a year ago as the no. 1 maker of personal computers delivered earnings that were in line with its previously lowered estimates.

Dell also said it has been cooperating with the Securities and Exchange Commission since August 2005 on an informal investigation of its accounting practices, including how the company booked its revenue, in past years.

Additionally, Dell said that for the first time it would soon begin using microprocessors from Advanced Micro Devices Inc. in some of its desktop and notebook PCs. Until now, Dell has only used microprocessors from Intel Corp. in its personal computers.

In after-hours trading yesterday, Dell shares dropped 98 cents to $21.82. The stock had gained 7 cents in the regular market session.

Dell said it earned $502 million, or 22 cents a share, on $14.09 billion in revenue, figures that were in line with a lowered forecast it gave on July 21, and that also met the latest consensus estimates of analysts surveyed byThomson First Call.

In July, Dell’s chief executive, Kevin Rollins, said the company suffered from pricing issues that would cause its profit to fall from a year ago when it earned $1.02 billion, or 41 cents a share, on $13.43 billion in revenue.

In a written statement after the market closed, Mr. Rollins said he was “disappointed with the results for the quarter,” and added the company was taking steps to get back on track. Mr. Rollins said Dell would speed up some of its cost-cutting efforts and increase investments in its services and support areas.

In a step away from its long-time practice of just using microprocessors by Intel, Dell said that next month it would begin selling its first Dimension-brand desktop computers that use chips from AMD. The move builds on an earlier Dell decision that it would begin selling servers with AMD’s processors this fall.

Dell didn’t give a forecast for its third fiscal-quarter. Wall Street analysts are currently expecting the company to earn 25 cents a share on $14.59 billion in revenue.


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