Monday, June 25, 2007

Old news: Dell being sued for Intel payments

My apologies for posting about something that happened several months ago, but I just learned about this and since I haven't heard it discussed, I'm guessing some of my readers are equally in the dark.

Back in February, a group of Dell stockholders filed a lawsuit against Dell and Intel, alleging that volume rebates the company had received from Intel had not been disclosed, causing the stockholders to not understand fully the importance of such payments to the company's profits.
"Intel secretly paid very large end-of-quarter cash rebates to PC (manufacturers), like Dell, that purchased all or virtually all of their microprocessor/chip requirements from Intel," the amended lawsuit states. "These rebates, which were, in fact, kickbacks, were not traditional volume-based discounts and the monies paid were separate and apart from and in addition to certain publicly known, co-marketing funds which Intel made available to certain of its customers to assist in product advertising."
The amount of the payments, according to the suit, was about $1 billion annually.

Although this is specifically separate from co-op/MDF and other such payments, as noted in the last sentence quoted, I've often argued that retailers should be required to reveal the amount of trade promo funds they receive, since the funding is often well in excess of profits. The SEC has thus far ignored my suggestions, however.

This lawsuit has some relationship to the AMD-Intel lawsuit and investigations of Intel in Europe and Korea, which involve some of the same payments.

Intel strongly denies any wrongdoing: "We conducted a preliminary review of the complaint. At first glance, it appears that some of the allegations with respect to Intel appear to have been completely made up."

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