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BACKGROUND: KIDDER COMMENTS -- DELL COMPUTER CORPORATION RESPONSE

 Note to editors: Several false allegations and misleading questions posed by a Kidder Peabody analyst, on Friday, November 20, prompted trading of more than 10 million shares of Dell Computer Corporation common stock (NASDAQ: DELL). As a result, the stock closed at 34-5~8, down 3-3~4 from the previous day when Dell had announced third fiscal quarter revenues and earnings that significantly exceeded analyst expectations. Dell officials contacted the Securities and Exchange Commission following the analyst's comments, to invite their review of the November 20 events and related trading patterns. Following for your background information are summaries of the allegations which prompted the stock sell-off, along with the facts to set the record straight.
 Issue: Were Dell's historical earnings properly reported; is there any likelihood of a restatement?
 There is no risk of a restatement of any of Dell's previous financial results. All of Dell's financial statements as filed with the SEC were reviewed and found to fairly present the company's financial position and to comply with generally accepted accounting principles (GAAP).
 Issue: Will future earnings be reduced because of unrecognized foreign exchange losses? Is there a risk of future writeoffs related to past foreign exchange losses?
 If the company were to liquidate all open hedge contracts today, the company's net deferred gain~loss on currency would be a small net gain. All other foreign exchange gains and losses have been recognized and reflected in previously reported results.
 Issue: Did Dell properly disclose its currency activities?
 Yes. The SEC requires a company to disclose the net of realized and unrealized losses on hedging contracts, not the specifics of what those contracts entailed or what portions of those losses have been realized. As required, Dell reported net realized and unrealized currency losses of $25 million in its fiscal 1992 10-K, and $38 million in the second quarter. The first quarter number was a loss of $27 million, which was an immaterial change from the year-end figure. At the end of the third fiscal quarter, the net realized and unrealized loss was $8 million.
 Issue: Were Dell's hedging practices appropriate and effective in reducing currency risk?
 Yes. Through the first nine months of fiscal 1993, currency gains and losses resulted in an immaterial net gain, achieving the company's objective of reducing volatility on the income statement related to currency fluctuations. Dell's hedges were effective in locking in future transactions to an anticipated net dollar rate.
 Issue: Did Dell engage in any inappropriate or excessive currency trading activities?
 No. Dell did, for a brief period of time, engage in currency trades to generate a current-period profit. All gains and losses realized on this activity were reflected in the current-period results, not deferred. There are many companies in corporate America that engage in currency trading activities. Even though Dell realized an immaterial net gain from this activity, the company adopted a policy in July to restrict its foreign exchange activities to hedging activities only. The company made this policy change because of accelerating growth in the business itself and a shift in priorities for the treasury group toward overall capital structure management.
 Issue: Was currency a major factor behind Jim Daniel's guidance to investors on June 18 that net margins could be lower in the second and third quarters?
 No. His downward guidance was largely due to the onset of the PC price war, and to the fact that Dell, like many other major PC companies, would need to reduce prices more deeply than had previously been the case. This would result in lower than anticipated gross margins, depressing earnings. Currency was not a factor and was in fact, immaterial to the financial results for the second and third quarters.
 Issue: Are there payables due to foreign exchange losses that will require significant uses of cash?
 Absolutely not. All contracts that have previously matured have been fully liquidated from a cash standpoint. The company does not engage in historical rollovers and currently owes nothing in connection with any past hedging losses. The company's anticipated offering of 4 million shares is for the purpose of funding working capital associated with future growth and has nothing to do with currency activities.
 Issue: Are Dell's foreign exchange practices in line with those of others in the industry?
 Yes. Dell's treasury and risk management functions, including its foreign exchange activities, were fully reviewed by both the regional and national offices of Price Waterhouse. They were found to be in full compliance with generally accepted accounting practices and within the norm for the industry. The instruments that the company has used, and the nature of its hedging strategies, are comparable to those used by Intel, Apple, and many others.
 -0- 11~23~92
 ~CONTACT: Michele Moore or Roger Rydell, media 512-794-4100, or Don Collis or Ken Smith, investor 512-338-8671, or 512-794-4034, all of Dell Computer Corporation~
 (DELL)


CO: Dell Computer Corporation ST: Texas IN: CPR SU:

LD -- NY088 -- 0784 11~23~92 18:13 EST
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Publication:PR Newswire
Date:Nov 23, 1992
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