Dell Drubbed by Accounting Probe

On Wednesday, rival Hewlett-Packard(HPQ) beat Wall Street expectations, with 5% growth in desktop PC sales and 14% notebook revenue growth.

Dell CEO Kevin Rollins said his company had gained share in key markets during the second quarter, with strong growth in China and the Asia-Pacific region. He also pointed to storage and services, where the company grew revenue 36% and 21% respectively, as areas of strength during the quarter.

And Rollins said the addition of AMD chips will give Dell access to a broader segment of the market while reducing its costs.

In May, Dell introduced AMD chips in a small segment of its server line, ending a longstanding practice of using only chips by Intel(INTC).

Dell also said it will also spend an additional $50 million to $100 million on customer support through the end of the fiscal year.

Dell's customer support, which was already an area of concern, has reportedly been besieged in recent days after the company's announcement Monday that it was recalling 4.1 million batteries for its notebooks because of fire hazards.

Management played down the significance of the SEC investigation, which Dell said was initiated in August 2005 and which it said does not indicate that any violations of law have occurred.

CFO Schneider characterized the investigation as "really just a list of questions," the likes of which the SEC sends out hundreds of times each year to companies, with the vast majority going undisclosed.

Schneider said that while Dell did not feel the matter warranted disclosure at the time, the company had uncovered certain issues while responding to the requests which would require Dell to bring more people into the circle as it looked into it.

As a result, Schneider said, the company felt it was prudent to disclose the investigation at this time.

But Schneider would not describe what type of issues its internal investigation was looking at, citing the ongoing investigation. And a Dell representative said the company could not comment on which division of the SEC was conducting the investigation.

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