Technology 01 Feb 2007 11:26 pm

Dell Sued Over Intel Payments

by Sean Hackbarth

Dell logo

It’s been a shaky few days for Dell Computer (DELL). First, a leadership shake-up brings Michael Dell back as CEO replacing Kevin Rollins. Now, an investor lawsuit contends Dell improperly accounted for rebates from Intel (INTC):

The suit alleges that Dell received at times as much as $1 billion a year in “secret and likely illegal” kickbacks in the form of “e-Cap” or “exception to corporate average pricing” payments” from Intel to ensure that Dell used no other chip supplier, according to The Journal. Specifically, the complaint alleges that Dell received payments from Intel for not doing business with American Micro Device The Journal reported.

Intel must not have been paying enough. Dell started selling computers with AMD (AMD) chips last year.

While recent events have been a little unsettling The National Post’s Jonathan Ratner reports stock analysts welcome Michael Dell’s return to running his company. The hope is Windows Vista will boost corporate computer sales and Dell starts buying companies to boost profits.

The challenge for Dell (Michael and his company) is

its manufacturing prowess isn’t the edge it used to be. And Dell doesn’t spend enough on research and development to truly innovate. As a result, Dell is mired in a commodity hardware game. That game plan was fine when rivals were inefficient, but HP can now squeeze Dell on price.

Dell’s purchase of Alienware is a sign they know they need to inject a product innovation ethos. They have to project something other than a basic, dependable image. Right now they’re The Gap of the computer world. They’re bland yet dependable–I’d buy a Dell in heartbeat just like I’d go to The Gap for some t-shirts and khakis. Grabbing a few Apple (APPL) people would really shake things up on the consumer side. Or if they can’t convince anyone there to leave the Cult of Jobs they should look at Sony (SNE) people who make sexy Vaios. On the corporate end going more into services means taking on IBM (IBM).

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