Sometimes it's profitable to change the rules when it suits you. So maybe you can't blame Dell ( DELL) for giving its bottom line a boost. Dell Thursday affirmed fiscal second-quarter sales and earnings targets, bumping its stock up 4.4%. Receiving less notice, however, was a plan to take a $700 million charge against earnings. About $200 million of that will go toward covering the cost of writing off the value of certain investments made by the company's venture capital arm, Dell Ventures, according to a company spokesman. Does the charge matter? As a one-time, extraordinary event, it shouldn't. But it's not so simple in Dell's case. The company's decision to exclude the Dell Ventures losses from its earnings per share marks an about-face from its past practice of including the results of investment activity on its bottom line. Moreover, the move raises the question of how much investors are supposed to trust what companies say about their earnings.
Is Turnabout Fair Play?Dell has been including its investment results in its earnings-per-share figures for several quarters. Not surprisingly, when the stock market was strong, those results were always gains. The effects of this strategy haven't been inconsequential: It was a larger-than-expected investment gain of $145 million that
|Padding It Out |
Four quarters of earnings at Dell, with and without investment gains
|Figures are based on a 30% tax rate. |
Source: The company