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Dell Computers and Michael Dell himself get wacked hard by the SEC. 104 Million Dollars hard.

Michael Dell and Dell Computer

Michael Dell before he and the company became $104 million lighter

In the last couple of days the US Security and Exchange Commission took Michael Dell and his company to the proverbial woodshed for a little beating over their deal with Intel to lock in exclusivity on the chips they use in their computers.

It comes as no surprise to anyone that Intel made a deal with Dell to only use Intel chips and to snub AMD’s chips. It appears that Intel gave rebates to Dell for the chips to solidify the deal and it appears all sides were happy.

Whoops.  Well, as I understand it what Dell did to get into hot water with the SEC was a little bookkeeping slight of hand with those rebates: Dell claimed those rebates as income.  Tsk. Tsk.

Here comes the fun part:  These exclusivity payments accounted for 10% of Dell’s operating income in 2003 and then went up to 38% in 2006, then to a whopping 76% in the first fiscal quarter of 2007.  Yeah, 76 per cent.

So when Dell was touting how great business was to all its investors and the industry… it wasn’t.

Cut to 2010. It appears that the SEC has worked a settlement deal with Michael Dell that will personally cost him 4 Million dollars and he gets to avoid some jail time.

His company doesn’t come out so well. Their settlement came to the price tag of 100 million dollars.

As I said, I think this sort of deal between Intel and Dell is no surprise to anyone. Especially when you look at the kinds of deals computer makers have made in the past.

Till fairly recently you could not buy a Dell computer without buying Microsoft Windows.  You could not. Period.

If you ordered a computer without a hard drive you would still get (or at least be charged for) a copy of Windows.

If you asked not to have any OS installed on your new computer, you would be told that was impossible and you would be charged for Windows and there was nothing you could do about it. There were cases of people going to small claims court trying to get refunded the cost of Windows.

My understanding of the old deal was that Microsoft got paid for every computer that rolled off the Dell line. No matter what.

Now, on one hand that is a scumbag kind of deal and really sucks but on the other hand if I were MS and could get that kind of deal from someone I’d do it in a heartbeat.

What’s all this mean to the average person?  Who knows. I can’t see Dell raising its prices to cover the costs but the 100 million will have to come from somewhere. I guess if you’re in the market for a Dell you should keep your eyes open. If you own the stock, look out but then again, the next stockholder’s meeting is going to be fun!

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