Analysts, according to First Call, have the July quarter-end numbers pegged at $0.30 EPS and $14.63 Billion in revenues.  The coming quarter is expected to have $0.33 EPS and $15.1 Billion revenues. 

But here is the kicker: its chief rival, Hewlett-Packard (NYSE:HPQ), just beat earnings expectations and gave the all-clear signal ahead for guidance.  This morning we got a strong durable goods order that somehow showed a somewhat weaker PC-demand, but that should have been seen in any of the companies recent guidance so it may already be included and already factored in.  It is still a wildcard.  Dell has seen some problems causing delays in recent days, and now we have to see what news comes out over the next five days to see if the report or expectations ahead get changed.

Dell gave last preliminary numbers on May 31 and shares had closed at $26.91 on that day.  So at $27.50 mid-day Friday shares are up roughly 2% since then.  Shares have recovered off recent lows with the market but are basically in the middle of a trading range of $26 to $29 since last earnings; but we wont do any formal charting analysis until earnings are imminent. Options are also too far out to use right now.  Analysts still have targets pegged north of $32.00.

Next week is going to be a dead week with most of Wall Street either out the full week or at least the second half of the week ahead of Labor Day, and this is one of the few reports that may act as a catalyst either way on the earnings front. Stay tuned…..

Jon C. Ogg
August 24, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

As a result of accounting errors and irregularities identified in that investigation and in additional reviews conducted by management, the Audit Committee has determined to restate the company’s financial statements relating to fiscal 2003, 2004, 2005 and 2006 (and interim periods) and the first quarter of fiscal 2007. Dell’s previously issued financial statements for those periods should no longer be relied upon.  Here is the result of the findings in summary:

• Net revenue for each annual period is expected to be reduced by less than 1 percent of the previously reported revenue for the period.
• The cumulative change to net income for the restatement period is expected to be a reduction of between $50 million and $150 million and the cumulative change to earnings per share  for the restatement period is expected to be a reduction of $0.02 to $0.07.
• The largest percentage changes in quarterly net income and EPS are expected to be in the first quarter of fiscal 2003 and the second quarter of fiscal 2004, each with expected reductions of between 10 percent and 13 percent; the fourth quarter of fiscal 2005, with an expected reduction of approximately 7 percent; and the second quarter of fiscal 2005 and the third and fourth quarters of fiscal 2006, each with an expected increase of approximately 5 percent to 7 percent. Net income and EPS for each of the other quarters are expected to change by 5 percent or less.
• The adjustments are not expected to have a material impact on the current balance sheet.  The adjustments are not expected to have a material impact on cash flows during the restatement period and are not expected to have a significant effect on the reported results of future operations.

If you read on through the company’s release, you’ll see that the company also found intential manipulation to attain certain financial targets.  It also found it did not maintain an effective control environment with adherence to GAAP standards.  CFO Don Carty has also issued several remedies it will take to fix the control issues and to eliminate this ahead.  Lastly, it addresses the ongoing SEC investigation.  The SEC’s investigation is ongoing, and there can be no assurance that there will not be additional issues or matters arising from that investigation.

All that really matters to us is that the wrong doings are not so bad that they will topple Michael Dell.  He came back and everything he telegraphed and that had been indicated before could have led anyone with a half brain or more to conclude that there were some pretty big manipulations inside the company.  As long as Michael Dell is not toppled, then this is the news we have finally all been waiting for.  The company will begin reporting again, and that is all we really care about.  This just fixes the rearview mirror.  The restatements are bad as all restatements are, but they don’t look so crucial that past analysis was anything that will topple it.  It is even possible that some will be given a pair of cuffs instead of a slap on wrist by the SEC, but this still gets the issue mostly behind and should be viewed with some relief as long as it has no effect on Michael.  The doomsday crowd will say this is horrible and they will point to the years of intentional misgivings, but longer-term PC and tech investors will say this is what the market has been waiting for and the company can finally spend all efforts focusing ahead rather than dealing with the past.  You can find Dell’s full release here on their IR site.

Jon C. Ogg
August 16, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.