Dell’s Sordid Intel Past

“We are going to have to get off their drug…” is how former Dell CEO Kevin Rollins describes Dell’s dependence on payments from Intel to meet their financial targets in messages to Michael Dell from 2004, released by the SEC.

The SEC’s charges centre around an agreement Dell had with Intel years ago not to use AMD chips in exchange for “large exclusivity payments”, which Dell became seriously dependent on:

The SEC alleges that Dell did not disclose to investors large exclusivity payments the company received from Intel Corporation to not use central processing units (CPUs) manufactured by Intel’s main rival. It was these payments rather than the company’s management and operations that allowed Dell to meet its earnings targets. After Intel cut these payments, Dell again misled investors by not disclosing the true reason behind the company’s decreased profitability.

The NYT says that other messages “talk about Dell needing to beg Intel for money to meet quarterly goals”.

The result? A $US100 million penalty for Dell and $US4 million for Michael Dell himself. Ouch. [Bits, SEC]