Report: Dell faces lawsuit over alleged Intel pact

By Hurmoth
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Grand Master

Hurmoth

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Dell is facing an investor lawsuit alleging that it improperly accounted for hundreds of millions of dollars in payments from its longtime partner Intel, The Wall Street Journal reported on its Web site on Friday.

In a lawsuit filed Wednesday by class action lawyer William Lerach, plaintiffs allege that the computer giant was receiving as much as $1 billion a year in "secret and likely illegal" kickbacks from Intel to ensure that Dell used no other chipmaker, the Journal said.

The suit was filed in the U.S. District Court in Austin, Texas, it said. Officials at the law firm could not immediately be reached for comment.

A Dell spokesman said the company does not comment on pending litigation. The company has not seen the lawsuit, he added.

Dell on Wednesday named founder Michael Dell as chief executive, replacing Kevin Rollins as the No. 2 computer maker struggles with missteps in the U.S. consumer market and market share losses to Hewlett-Packard.

souricon.gif News Source: CNET News

Grand Master

Hurmoth

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Oh noes, a manufacturing company was good enough to secure an exclusive contract! /SUE!

I don't think some of you are understanding the reasoning behind the lawsuit.

The people who are suing are shareholders. From what I understand, they have filed a class action lawsuit that states that Dell should not have withheld the information regarding these large sums of money given by Intel to use only Intel chips. In other words, these shareholders feel that they were entitled to this information, they are after all shareholders. Furthermore, by only using Intel chips, these shareholders feel that Dell's business was hurt by not opening up to alternative chips (i.e. AMD). Essentially the shareholders are saying that the exclusive contract with Intel was not disclosed to shareholders as it should have been and these shareholders feel that the exclusive contract did more to hurt Dell's business, which in turn hurt the stock price, than it did to help Dell's business and the stock price.

Mentor

RootWind

Posted
Posted
I don't think some of you are understanding the reasoning behind the lawsuit.

The people who are suing are shareholders. From what I understand, they have filed a class action lawsuit that states that Dell should not have withheld the information regarding these large sums of money given by Intel to use only Intel chips. In other words, these shareholders feel that they were entitled to this information, they are after all shareholders. Furthermore, by only using Intel chips, these shareholders feel that Dell's business was hurt by not opening up to alternative chips (i.e. AMD). Essentially the shareholders are saying that the exclusive contract with Intel was not disclosed to shareholders as it should have been and these shareholders feel that the exclusive contract did more to hurt Dell's business, which in turn hurt the stock price, than it did to help Dell's business and the stock price.

Plus, kick-backs imply that the money went straight to the executives.

Grand Master

Hurmoth

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This is a bad precedent.

Next Apple, Toshiba etc. are going to be sued for just using Intel only chips.

Not necessarily. If the investors, or shareholders, know about incentives and if helps the performance of the company, then the shareholders have no reason to sue.

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