PC maker reaches deal to avoid delisting by agreeing to divulge delinquent financial reports.
January 24, 2007

Dell will be able to stay on the Nasdaq as long as it divulges a report its audit committee has been conducting into its accounting irregularities and files two past-due quarterly financial reports it owes.

The Round Rock, Texas-based computer maker said Tuesday that the Nasdaq Listing Qualifications Panel had granted its request for continued listing. But the Nasdaq panel agreed not to delist Dell only if it meets certain conditions.

Dell has to provide the Nasdaq with information about the audit committee investigation by March 1. The PC maker also must file its delinquent periodic reports, along with any required restatements of prior financial statements, by March 14.

Dell is one of a number of companies that have faced delisting threats from the Nasdaq, most of them because of problems they have uncovered with stock options backdating. In Dell’s case, the problem stems from accounting irregularities that the company has not yet explained in detail (see Dell Fights Delisting).

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“We’re not commenting on what the details of the investigation are, but we don’t have issues with options backdating,” said Dwayne Cox, a Dell spokesperson. He added that Dell is not providing updates on any of the investigations at this time and no commentary beyond what’s in its news releases.

The Nasdaq is not the only authority concerned with Dell’s delinquency. The company is under investigation by the United States Attorney for the Southern District of New York and the U.S. Securities and Exchange Commission. U.S. prosecutors have subpoenaed financial records from Dell going back five years.

The company also faces a class action lawsuit charging the computer maker with providing misleading expectations to investors.

Dell said it anticipates it will be able to provide the Nasdaq with the requested information by the March 1 deadline. But meeting its other deadlines could be more problematic.

“The company is working diligently to file the delinquent reports with the SEC as soon as possible, but does not expect that it will be able to do so by March 14,” said a statement by Dell.

“The company plans to ask the Nasdaq Listing and Hearing Review Council for additional time to file these periodic reports, but there can be no assurance that the Council will grant the company’s request,” the statement continued.

Shares of Dell rose $0.18 to $24.47 in recent trading.

Losing PC Market Share

Dell has been facing other issues besides accounting problems. The company has been losing share in the PC market to rival Hewlett-Packard, according to recent research reports from IDC, Gartner, and other sources (see HP Extends Lead over Dell).

“Our checks indicate that Dell’s struggles in the U.S. PC market have picked up since last quarter,” wrote UBS analysts Benjamin A. Reitzes, Arun Sharma, and Jennifer Thorwart in a research note Monday. “We believe corporate desktops and consumer segments are particularly weak in the U.S. and we believe Dell is losing share in Europe.”