Dell Intel Rebate Probe As Managers Sacked
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– Michael Dell, returning to his company as CEO, has wasted no time in sledge-hammering the company’s problems.

In a memo to Dell employees, Dell cancelled bonuses for 2006 and fired surplus managers to help cut costs. The number of top managers who report to Dell will be streamlined from more than 20 to 12.

To replace them, Paul Bell, who runs the company’s European operations, will become top executive for the Americas which accounts for two-thirds of revenue. CFO Don Carty will also take on more responsibilities, including human resources and investor relations.

 Dell said he won’t hire a chief operating officer, will push faster product development and will expand into new businesses. “We have great people,”

Dell told staff. “But we also have a new enemy: bureaucracy, which costs us money and slows us down. We created it, we subjected our people to it and we have to fix it!”

 Dell chided his staff as the company ended its fiscal year Friday by noting “great efforts, but not great results”. “This is disappointing, and it is unacceptable,” wrote Dell, who added he plans to remain CEO for several years.

 After its devastating Sony-made battery recall, the company lost its No. 1 position in the industry to Hewlett Packard last year.

Details of the shake-up came after Michael Dell replaced Kevin Rollins as CEO (CDN, Friday). His targets: disappointing earnings reports, eroding market share and a federal accounting probe.On top of all that, there is now a legal challenge claiming Dell received illegal payments from Intel to keep using its chips, while it dummied models built round AMD chips that it never took to market. The investor class-action lawsuit accuses Dell of improperly accounting for the $1 billion or so it received from the giant chip maker.

 The suit, claiming class action status on behalf of shareholders, alleges that Dell’s profits were inflated by hundreds of millions of dollars in quarterly rebates from Intel that Dell received as “e-cap payments” – standing for “exception to corporate average pricing” – for not doing business with AMD. These payments were described as “secret and likely illegal” kickbacks

The complaint asserts that Dell each year after 1999 secretly designed computers based on AMD chips. But those computers would be put on hold.

he 251-page complaint was filed in Austin, Texas, by class-action specialist law firm William Lerach. It also alleges that investors were misled about serious accounting, quality and customer-service problems – even as Dell executives sold billions of dollars worth of Dell shares. For good measure, it also accuses Intel of participating in a scheme to defraud Dell investors.

Chairman Dell and the displaced Rollins are among 16 executives named in the suit.In a separate action, Dell also been subpoenaed by the US attorney for the Southern District of New York over its financial reporting. In November, Dell was forced to delay its fiscal third-quarter earnings because of the complexity surrounding an SEC investigation.