The Securities and Exchange Commission (“SEC”) and U.S. Attorney’s Office for the Southern District of New York are investigating claims that Dell inflated financial results by engaging in improper revenue recognition and accounting practices. Dell began reducing sales and profit projections as the Company began missing its own revenue, earnings per share and unit sales growth targets, causing significant declines in its stock price.
On August 17, 2006, Dell announced its fifth consecutive quarter of disappointing
results, again significantly missing its revenue and earnings per share targets. The Company also revealed that the SEC had begun investigating its revenue recognition and accounting practices in August 2005, and in connection with its own internal accounting review it had recently discovered information that raised potential issues relating to certain periods prior to fiscal 2006. Dell also disclosed that its Audit Committee was undertaking a full review.
On September 11, 2006, Dell disclosed that it would not be able to file its interim financial report for its second quarter of 2007 and that the U.S. Attorney's Office for the Southern District of New York had served Dell with a subpoena requesting documents concerning its accounting and financial reporting between 2002 and 2006.
Over the past two years, the price of Dell stock, and the value of Dell stock owned through Dell’s 401(k) retirement plans, has fallen dramatically. Dell employees who own Dell stock through the retirement plans may be able to recover some of their losses.
This is the defendant's reply in further support of its motion to dismiss the class action complaint.
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