S.E.C. Releases High Level Dell Communications Hinting at Intel Kickbacks

Dell has always been the golden child of the PC industry, and with good reason. The company almost single handedly invented the direct from manufacturer business model, and went on to become one of the largest and most successful OEM’s in the world. Dell’s whirlwind success has been studied extensively, but new evidence is suggesting there might be more to Dell’s accomplishments than meets the eye.
On Thursday the US Securities and Exchange Commission released a batch of high level communications between Dell and Intel Executives that hint pretty heavily that the company was reliant on Intel kickbacks for its financial success, and that shareholders were intentionally kept out of the loop. According to the S.E.C, Kevin Rollins, Dell’s chief executive for part of the period in question attributed the companies runaway success with a “tightly controlled supply chain, highly efficient infrastructure and direct relationships with customers”. If this was true, it wouldn’t explain why Rollins communications with founder Michael Dell explained Intel payments as an “addictive drug” that they relied upon to hit quarterly targets.
Suspicion over Dell’s relationship with Intel swirled a few years back when AMD server chips had the edge, and Dell simply refused to play ball. Dell executives claimed that adding a second chip supplier would add complexity into an otherwise perfectly efficient supply chain. It sounds like typical executive double speak, but clearly something didn’t add up.
Dell has been slapped with a $100 million penalty, and even Michael Dell is personally on the hook for $4 million. Does this change your opinion of Dell?
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Sovereign
July 26, 2010 at 6:15am
I love how "Silencer" insists his experiences about Dell are the only ones with any value, and therefore his assupmtions (that Dell "sucks") should define the terms of the debate.
In the real world, experiences with Dell vary as much as any other company. Just like hard drives, some people will swear by (or at) a certain manufacturer while others insist the opposite is true.
Personally, if I were to pull a "Silencer," I'd say all Dell systems rule and anyone who has a problem is unaware of that "fact." Since I'm a bit more open-minded than he is, I'm going to say that while my personal experiences with Dell have been impeccable, I'm not going to say that everyone has had good experiences.
My Inspiron E1505 laptop got me through college and is still running strong. I had no issues with the machine in the four years I owned it. Atypically heavy use (F@H, mainly) destroyed the A/C adapter, but the hardware inside the laptop remains flawless. I sold it to a friend because I wanted a laptop more capable of casual gaming. I replaced it with an Outlet XPS m1530 which has run perfectly since Day 1. I did reformat it because I wished to replace Windows Vista with Windows 7, but again the hardware remains sound.
The only times I've dealt with Dell Tech Support, I've always come away feeling like I got what I deserved in terms of service.
Even my parents (who don't do much more than email) were fine with their Dell until the IBM Deathstar hard drive failed and required replacement. For those that are unaware, IBM built a series of "Deskstar" hard drives which were particularly unreliable, hence the moniker "Deathstar."
Dell's tendency toward proprietary parts has abated at least to some extent (my parents' desktop being an example of part lock-in since non-Dell RAM refused to boot), seeing as I've used other manufacturers' RAM in both my Inspiron and XPS.
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Silencer
July 26, 2010 at 7:02am
I'll admit that while I think all Dell Desktops are bad bargains, some of their laptops are actually pretty nice. And some of their monitors too.
I'm glad for your good support experiences. I've heard of, and have had, many bad ones.
The proprietary parts issue is one of my biggest with them, which I didn't even mention. It's B.S.
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Silencer
July 25, 2010 at 10:04pm
...with all that I know about them.
In short: Dell 'sucks'. And now, it's out there that they also 'cheated'.
I'm suprised at how many Maximum PC commenters below, are so ignorant of these facts.
A] For example, the first respondant, (at the bottom,) preytofailure said:
"Dell Computers are very nice, I'm not enough of a fanboy to concern myself with their profit distribution. Just keep the cheap computers coming."
1) No they are not very nice. You gave no examples of how they are, so I'll give no examples of how they aren't. But I could probably give about 100, and I'm seriously not exaggerating.
2) Profit distribution? Learn english. Kickbacks is the word.
3) Keep the cheap computers coming? That's the point of the article, which you completely missed. Because of Dell and Intel's illegal activity, the only competitor to Intel, AMD, was directly harmed, harming competition, harming all of us. AMD survives on thin margins. This kind of illegal behavior threatens their existence. If AMD goes under, HOW CHEAP WILL DELL COMPUTERS BE THEN? LET ME HELP YOU, THEY'LL COST TRIPLE.
B] A few comments later, (higher up,) BAMT said:
"...However, even though the systems were clearly cheap, most of the old Dimensions are pretty solid systems, mind you. And Dell gives at least a year warranty from my experience for new machines that is pretty decent; my friend's motherboard fried twice (it's an older XPS that's known for problems), one in the warranty period, and Dell gave him a free replacement. The second time his warranty was out so he bought one from the Internets."
1) When you say 'most of the old Dimensions are pretty solid systems', um, well... I've fixed a lot of them, and do you know what? One or both of the front, and sometimes also some of the rear, USB ports on most 'old Dimensions' (2x00 models, i.e. 2300, 2400, 2600 etc.) DON'T WORK. They're hard-wired INCORRECTLY on the cheap-ass motherboards. Pretty solid my ass, they all suck.
2) "Motherboard fried twice." Maybe because it's a cheap piece of crap. "Known for problems." Right, you're making MY case. "gave him a free replacement." He paid for it when he bought the computer. "The second time." He paid for it again. How cheap now? Dell sucks. "the Internets" Hmm.
C] mjfutures said:
"...They offer the best warranties in the industry on the business side, and if you have a hard drive or monitor go out you normally have a replacement on your door step within 14-24hrs...."
1) "best warranties in the industry" Really? Is HP or Gateway or Acer or (Insert OEM here) worse? I know that both my customers and I hate calling India for tech support.
D] Keith E. Whisman said:
"...Those are pretty hefty fines...."
1) No sir. They need to be about 10 times that amount. These fines are equal to a slap on the wrist.
I'll shut-up now. But really, MAXIMUM PC readers? Man. Come on guys.
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josephnasu
July 27, 2010 at 11:28am
I totally agree... The only thing INTEL wants is the DEATH of AMD. As long as AMD goes under, Intel can charge anything they want for their chips. They no longer have a reason to get better... to get cheaper... with no competition WE ARE THE LOSERS!!! You idiots supporting Dell for its decision to take kickbacks... we are the ones paying higher costs for the same thing. Without the kickbacks, the computers you purchased with "Intel Inside" should have been cheaper!
WHEN ARE PEOPLE GOING TO WAKE UP?!!!
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robrtb
July 25, 2010 at 10:14pm
Your long rant wasted:
A) valuable time of any reader
1) "In short", your post is pointless and lacks anymore substance than you flamed others for.
B) your time
1) learn to use your time more wisely to gather facts, resources, etc.
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Silencer
July 25, 2010 at 10:46pm
You say my post was "pointless and lacks anymore substance than you flamed others for"
Here are the main Points and Substance, (also listed in my post):
Dell 'sucks'. Their computers are not very nice. Plus, these examples:
Dell 'cheated'. They took kickbacks from Intel.
Dell and Intel harmed AMD, and all of us.
If AMD goes, computers will cost triple.
Dimensions are not solid systems. Their USB ports often don't work.
A motherboard failing twice, may indicate a cheap-ass motherboard.
Buying another motherboard, makes the computer less cheap.
Dell's warranties, are no better than their competitors.
My customers and I hate reaching India, when calling Dell tech support.
A ten-fold judgement against them would be more appropriate.
(And AMD should get the money, btw.) (Not listed in my post.)I'm not meaning to flame, I'm just sharing some "facts", etc.
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jimofnyc
July 25, 2010 at 5:42pm
I bought one Dell machine. In 1998 . A big desktop with a 400Mhz PII. I thought is was nicely made, and it never had any problems chuggin away with Windows 98. I quickly learned to build my machines after that. I have seen the innards of several Dell desktops since then and it is my opinion that their quality slowly went down as they began to move more and more machines.
I am not surprised by the corporate mentality of the short nickel over the long dime. You see it everywhere. I am sure they thought they'd never get caught. Probably if it wasn't for AMD squawking over the last several years all of this would have washed downstream without it ever really coming to the surface. It's a moral issue really - how you treat your customers, shareholders and your competitors.
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Keith E. Whisman
July 25, 2010 at 3:09pm
Ok.. Those are pretty hefty fines. One question though. Where does all that cash go? Are profits from fines included in the national pot, to be spent on the cost of running the country?
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Biceps
July 25, 2010 at 11:01pm
Kieth, here is a quote from the uk register from this year:
"Dell's net income slipped to $334m in the quarter ended January 29, compared to $351m a year ago."
Those are quarterly net income figures. That means that the fine from collusion is less than one third of one quarter's net income.
Those fines are a joke.
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Pylon
July 25, 2010 at 3:09pm
I'd say their business/corporate computing side is quite decent, though I have no experience with their consumer side.
I've used a Latidue D620 and a D630 and have to say they're fantastic laptops. Excellent build quality, decent keyboard, and overall very nice ergonomics. They fall a bit short of Thinkpads but they look better IMO. Also, we recently got a refurb Vostro 220 desktop and it's been excellent. The only bad experience is that it came with XP Pro instead of 7 Pro as advertised (due to downgrade option being exercised) and they forgot to include a 7 install disc. After a 1 hour+ call with support (transferred around 8 times between different departments) they finally mailed us a 7 install disc.
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josephnasu
July 25, 2010 at 2:54pm
I ask all the people supporting Dell to WAKE UP! I hope you understand that Intel has used the Celeron chip as a give away (i.e. FREE) to computer companies for years to keep them purchasing OVER PRICED CPU's from Intel! Whether it be Dell, Toshiba, Sony, NEC, etc. ALL of the major players in the computer market has been BOUGHT by Intel and we are the LOSERS! For years there has been no competition in the CPU market because AMD has not been allowed to enter it. Even with better priced and faster CPU's, AMD was shut out because Intel was giving away the Celeron "crap" chip. There were kickbacks to these companies for ONLY purchasing Intel... Intel is a dirty company and those supporting Intel are losers... as we all are for letting this continue!
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mjfutures
July 25, 2010 at 2:31pm
Dell makes great computers that cater to low budget families to fortune 500 companies. They offer the best warranties in the industry on the business side, and if you have a hard drive or monitor go out you normally have a replacement on your door step within 14-24hrs. This article does not change my opinion one bit.
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BAMT
July 25, 2010 at 6:00pm
I agree with that statement for the most part. I used to think of Dells as those crap computers that grandmothers buy, but they actually aren't bad. I think the only time Dell really slipped up was in the later P4 era (and maybe a little into the Core era), when their quality decreased a little. However, even though the systems were clearly cheap, most of the old Dimensions are pretty solid systems, mind you. And Dell gives at least a year warranty from my experience for new machines that is pretty decent; my friend's motherboard fried twice (it's an older XPS that's known for problems), one in the warranty period, and Dell gave him a free replacement. The second time his warranty was out so he bought one from the Internets.
So don't laugh without explaining, please.
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nbrowser
July 25, 2010 at 1:29pm
Only name brand systems in my possesion are Macincraps for fun boxen, my PCs, all hand built all flexible and nice to use and work on, especially the main one which Dell couldn't even come up with a comparablew config. Sure Intel chips and the bomb these days but yaknow, AMD does have it's place as a budget supplier.
Just wish companies like Dell would offer more options and adding AMD would do just that, I mean if HP can do it, why can't Dell ?
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profdlp
July 25, 2010 at 12:02pm
Does this change your opinion of Dell?
No. I still don't like them.
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PawBear
July 25, 2010 at 9:35am
My wife and I realized our dislike of Dell's lack of quality, reliability, and proprietary parts a long time ago. If someone gives me one I'll accept it, but I'll never purchase another or recommend them.
Competitor machines are far better, but clever marketing and kickbacks have helped them maintain their market position.
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preytofailure
July 25, 2010 at 9:01am
Dell Computers are very nice, I'm not enough of a fanboy to concern myself with their profit distribution. Just keep the cheap computers coming.
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