Dell's Deleterious Delay
Call it Wall Street's version of a late charge. Dell's (DELL) share price fell 1.5% to $21.33 per share early Monday, after news that the Round Rock, Texas-based PC maker is delaying its second quarter 10-Q filing amid accounting probes.
Dell said Sept. 11 that it can't file because of "questions raised" in connection with the previously announced informal investigation by the U.S. Securities and Exchange Commission (SEC) and the subsequently initiated independent investigation by the Audit Committee of its board of directors. The company said it plans to file the report as soon as possible.
SEC requests for information have been joined by a similar request from the United States Attorney for the Southern District of New York, who has subpoenaed documents related to the company's financial reporting from 2002 to the present.
"We are fully cooperating with the investigations and working to resolve any and all issues raised in connection with those investigations as quickly as possible, and we will take any appropriate remedial or corrective actions to address any problems," Chairman Michael Dell said in a press release.
Dell has suspended its ongoing share repurchase program until further notice. The computer company has also postponed a meeting with analysts that was to be held on Wednesday, Sept. 13 and will reschedule it to a later date. Dell will be holding its Technology Day on Tuesday, Sept. 12, in New York showcasing its latest products and services.
"While [the] filing delay is not surprising given the previous acknowledgment of the issue, we are concerned with continuing headline risk and administrative costs," Standard & Poor's Corp. analyst Richard Stice said in a research note Sept. 11. Given factors such as Dell's leading market position and stock price, Stice keeps his rating on Dell at hold and his target price on the stock at $23 per share. (S&P, like BusinessWeek Online, is owned by The McGraw-Hill Companies.)
Wall Street analysts have been giving Dell a thumbs down in recent weeks, according to StarMine. The San Francisco analyst rating research firm as of Aug. 15 says that 18 of 27 analysts have revised their earnings per share estimates for Dell's quarter ended in October; the average revision dropped 6.4%.
Analysts aren't expecting much from Dell for 2007, either. 22 of 27 analysts have already revised their 2007 EPS estimates down as of Aug. 15 by an average 3.2%. The company is struggling with setbacks that range from its accounting investigation to stiff competition from rivals.