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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): November 21, 2006
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Dell Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-17017 74-2487834
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Dell Way, Round Rock, Texas 78682
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (512) 338-4400
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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Item 2.02 - Results of Operations and Financial Condition.
On November 21, 2006, Dell Inc. issued a press release announcing its
preliminary financial results for its fiscal third quarter ended November 3,
2006. A copy of the press release is furnished as Exhibit 99.1 to this report.
Item 8.01 - Other Events.
Dell is involved in various claims, suits, investigations and legal
proceedings. As required by Statement of Financial Accounting Standards No. 5,
"Accounting for Contingencies," the company accrues a liability when management
believes that it is both probable that a liability has been incurred and the
company can reasonably estimate the amount of the loss. Management believes that
the company appropriately accrues for all such matters. However, the unfavorable
resolution of one or more of these matters in a particular period could
adversely affect our operating results.
Investigations and Related Litigation
In August 2005, the U.S. Securities and Exchange Commission (the "SEC")
initiated an informal investigation into certain accounting and financial
reporting matters at Dell, and recently issued a formal order of investigation.
In August 2006, because of potential issues identified in the course of
responding to the SEC's requests for information, the company's Audit Committee,
on the recommendation of management, initiated an independent investigation. The
investigations are examining certain accounting and financial reporting matters,
including issues relating to reserves and other balance sheet items that may
affect the company's previously reported financial results. Due to questions
raised in connection with these ongoing investigations, Dell has not filed the
Form 10-Q for its fiscal second quarter ended August 4, 2006, and does not
expect to be able to timely file its Form 10-Q for the fiscal third quarter
ended November 3, 2006. The investigations are ongoing, and no determination has
been made as to whether restatements of prior period financial statements will
be required. Management is cooperating with the SEC and the Audit Committee, and
the company is committed to resolving the issues raised in connection with the
investigations and regaining compliance with all SEC filing requirements and all
NASDAQ listing requirements as soon as possible.
The SEC requests for information were joined by a similar request from
the United States Attorney for the Southern District of New York ("SDNY"), who
subpoenaed documents related to the company's financial reporting from 2002 to
the present. The company is also cooperating with the SDNY.
The company and various current and former directors and officers of
the company are parties to securities, ERISA and shareholder derivative lawsuits
all arising out of the same events and facts. Three securities class actions are
pending in the Western District of Texas, Austin Division against the company,
Mr. Rollins and Mr. Schneider asserting violations of sections 10(b) and 20(a)
of the Securities and Exchange Act of 1934 based on alleged false and misleading
disclosures or omissions regarding Dell's financial statements, governmental
investigations, and known battery problems. Four putative class actions were
also filed in the Western District by purported participants in the company's
employee pension benefit plan asserting claims under ERISA and alleging that the
company and certain current and former officers and directors imprudently
invested, managed or disclosed information regarding the company's 401(k) plan.
In addition, five shareholder derivative lawsuits have been filed in three
separate jurisdictions (the federal district court in Austin, Texas; the state
district court in Williamson County, Texas; and the state district court in
Travis County, Texas) naming various current and former officers and directors
as defendants and Dell Inc. as a nominal defendant and purporting to allege
claims derivatively on behalf of Dell under state law, including breaches of
fiduciary duties. Dell intends to defend all of these lawsuits vigorously.
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Other Litigation
The following is a description of other significant legal matters in
which Dell is involved:
Copyright Levies -- Proceedings against the IT industry in Germany seek
to impose levies on equipment, such as personal computers, multifunction devices
and printers, that facilitate making private copies of copyrighted materials.
The total levies due, if imposed, would be based on the number of products sold
and the per-product amounts of the levies, which vary. Dell, other companies and
various industry associations are opposing these levies, and instead are
advocating compensation to rights holders through digital rights management
systems.
There are currently three levies cases involving other companies
pending before the German Federal Supreme Court. Adverse decisions in these
cases could ultimately impact Dell. The cases involve personal computers,
printers and multifunctional devices. The amount claimed with respect to
personal computers is (euro) 12 per personal computer sold. The amounts claimed
with respect to printers and multifunctional devices depend on speed and color
and vary between (euro) 10 and (euro) 300 for printers and between (euro) 38 and
(euro) 600 for multifunctional devices. The equipment manufacturers in these
cases recently lost in the lower courts, and have appealed. ZPU, a joint
association of various German collection societies, has instituted arbitration
proceedings against Dell before the Arbitration Body in Munich, claiming a levy
of (euro) 18.4 per personal computer that Dell sold in Germany from January 1,
2002 through December 31, 2005. Dell intends to defend this claim vigorously.
Lucent v. Dell -- In February 2003, Lucent Technologies, Inc. filed a
lawsuit against Dell in the United States District Court for Delaware, and the
lawsuit was subsequently transferred to the United States District Court for the
Southern District of California. The lawsuit alleges that Dell infringes 12
patents owned by Lucent. In April 2003, Microsoft Corporation filed a
declaratory judgment action against Lucent in the United States District Court
for the Southern District of California, asserting that Microsoft products do
not infringe patents held by Lucent, including 10 of the 12 patents at issue in
the lawsuit involving Dell. These actions were consolidated for discovery
purposes with a previous suit that Lucent filed against Gateway Inc. In
September 2005, the Court also granted a summary judgment of invalidity with
respect to one of the Lucent patents asserted against Dell. Fact and expert
discovery has closed, and the three actions have been consolidated into five
separate trials, in which a different group of patents will be tried to each
jury. In July 2006, the parties mediated before the Magistrate Judge in San
Diego, and another mediation is scheduled for November 2006. The first trial is
scheduled to begin in January 2007, and the last trial is scheduled to begin in
July 2007. One of the trials is stayed pending additional review in January
2007. Dell is defending these claims vigorously. Separately, Dell has filed a
lawsuit against Lucent in the United District Court for the Eastern District of
Texas, alleging that Lucent infringes two patents owned by Dell. That litigation
is pending.
Sales Tax Assessments -- Several state and local taxing jurisdictions
have filed assessments and litigation against Dell Catalog Sales L.P. ("DCSLP"),
an indirect wholly-owned subsidiary of Dell, alleging that DCSLP has an
obligation to collect tax on sales made into those jurisdictions because of its
alleged substantial nexus or physical presence in those jurisdictions. DCSLP
disputes the allegation that is has nexus in these jurisdictions, and is
defending these claims vigorously.
Dell is involved in various other claims, suits, investigations and
legal proceedings that arise from time to time in the ordinary course of its
business. The company does not expect that the outcome in any of these other
legal proceedings, individually or collectively, will have a material adverse
effect on Dell's financial condition, results of operations, or cash flows.
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Additional Risk Factors
In addition to the risk factors described under under Part I - "Item 1A
-- Risk Factors" in Dell's Annual Report on Form 10-K for the fiscal year ended
February 3, 2006, the following factors could adversely affect Dell's business,
its results of operations or financial condition:
o Possible outcomes of the ongoing investigations into certain accounting and
financial reporting matters include a determination that restatement of
prior period financial statements is required, a conclusion that there is a
material weakness in the company's internal controls over financial
reporting, and a determination that disclosure controls and procedures are
not effective. As described above under "Investigations and Related
Litigation", the investigations are ongoing, and no such determinations or
conclusions have been made.
o On September 15, 2006, Dell received a NASDAQ Staff Determination notice
stating that the company is not in compliance with NASDAQ Marketplace Rule
4310(c)(14) because it has not timely filed its Quarterly Report on Form
10-Q for the period ended August 4, 2006, and that its common stock is,
therefore, subject to delisting from The NASDAQ Stock Market. Dell has
requested a conditional listing from a NASDAQ Listing Qualifications Panel,
but there can be no assurance that the Panel will grant Dell's request.
o Litigation and governmental investigations or proceedings arising out of or
related to accounting and financial reporting matters, or any restatement
of Dell's financial statements, could result in substantial costs. Because
Dell has not completed its required filings with the SEC, Dell may be
prevented from completing other required government regulatory filings, and
could incur substantial costs to defend legal actions, or be required to
pay damages. See the claims, suits, investigations and legal proceedings
described above under "Investigations and Related Litigation". Dell could
face additional litigation depending upon the conclusions of the
investigations into certain accounting and financial reporting matters.
Item 9.01 - Financial Statement and Exhibits.
(c) Exhibits
99.1 Press Release issued by Dell Inc., dated November 21, 2006.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DELL INC.
Date: November 21, 2006 By: /s/ Thomas H. Welch, Jr.
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Thomas H. Welch, Jr.
Vice President and Assistant Secretary
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EXHIBIT INDEX
Exhibit
No. Description of Exhibits
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99.1 -- Press Release issued by Dell Inc., dated November 21, 2006.
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