Dell Digs Up the Dirt

Updated from March 29

Dell(DELL Quote) said it has discovered evidence of misconduct and a number of accounting errors -- the company's most serious admission about its bookkeeping practices that triggered an investigation by the Securities and Exchange Commission.

The computer giant also will not be able to file its annual report on time because of the investigation, and will miss the April 18 extension date to file the 10-K report. Dell is already delinquent in filing its quarterly report for the third quarter of fiscal 2007.

The delinquencies have put Dell at risk of being delisted from the Nasdaq, although the exchange has stayed action to delist the stock pending a full review by a Nasdaq special council.

Shares of Dell dropped more than 6% after the previous close but were lately down 1.5% to $23.03 Friday morning.

Thursday's announcement is the latest sign of trouble at Dell, which has seen sales stall in the past year due to a mixture of operational stumbles and stronger competition from Hewlett-Packard(HPQ Quote). Dell's stock is down 23% in the past 12 months.

Earlier this year, founder Michael Dell returned to the CEO post, replacing Kevin Rollins, in the hopes of rejuvenate the company. But Thursday's revelation about misconduct and deficiencies in the financial control environment signal that the accounting investigation may complicate the turnaround plan.

"As we move toward the conclusion of our investigation, we are committing the time and resources required to ensure a thorough and comprehensive review and resolution of all identified issues and the implementation of appropriate remedial measures," said Dell director Thomas Luce, who chairs the company's audit committee.

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