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Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a discussion of Dell's significant on-going legal matters and other proceedings:
Investigations and Related Litigation — In August 2005, the SEC initiated an inquiry into certain of Dell's accounting and financial
reporting matters and requested that Dell provide certain documents. The SEC expanded that inquiry in June 2006 and entered a
formal order of investigation in October 2006. In August 2006, because of potential issues identified in the course of responding to
the SEC's requests for information, Dell's Audit Committee, on the recommendation of management and in consultation with
PricewaterhouseCoopers LLP, Dell's independent registered public accounting firm, initiated an independent investigation, which
was completed in the third quarter of Fiscal 2008. Although the Audit Committee investigation has been completed, the SEC
investigation is ongoing. Dell continues to cooperate with the SEC investigation. Dell and the SEC staff have had preliminary
discussions about a potential settlement of the matter. Thus far, an agreement has not been reached. Dell believes that any resolution
would likely include monetary penalties, which cannot be quantified at this time, and other relief within the SEC's authority.
Discussions with the SEC staff are ongoing, and no assurance can be given as to the ultimate outcome of this matter, including the
terms and conditions of any settlement.
Dell and several of its current and former directors and officers were named as parties to the following outstanding securities and
shareholder derivative lawsuits all arising out of the same events and facts.
— Four putative securities class actions filed between September 13, 2006, and January 31, 2007, in the Western District of
Texas, Austin Division, against Dell and certain of its current and former officers were consolidated as In re Dell Securities
Litigation, and a lead plaintiff was appointed by the court. The lead plaintiff asserted claims under sections 10(b), 20(a), and
20A of the Securities Exchange Act of 1934 based on alleged false and misleading disclosures or omissions regarding Dell's
financial statements, governmental investigations, internal controls, known battery problems and business model, and based
on insiders' sales of Dell securities. This action also included Dell's independent registered public accounting firm,
PricewaterhouseCoopers LLP, as a defendant. On October 6, 2008, the court dismissed all of the plaintiff's claims with
prejudice and without leave to amend. On November 3, 2008, the plaintiff appealed the dismissal of Dell and the officer
defendants to the Fifth Circuit Court of Appeals. The appeal was fully briefed, and oral argument on the appeal was heard
by the Fifth Circuit Court of Appeals on September 1, 2009. On November 20, 2009, the parties to the appeal entered into a
written settlement agreement whereby Dell would pay $40 million to the proposed class and the plaintiff would dismiss the
pending litigation. The settlement was preliminarily approved by the district court on December 21, 2009. The settlement is
subject to certain conditions, including opt-outs from the proposed class not exceeding a specified percentage and final
approval by the district court. Until these conditions to the settlement have been satisfied, there can be no assurance that the
settlement will become final. If the settlement does not become final, Dell will continue its defense of the appeal before the
Fifth Circuit. Therefore, as of January 29, 2010, Dell has not accrued a liability for these class actions.
— In addition, seven shareholder derivative lawsuits filed between September 29, 2006, and January 22, 2007, in three
separate jurisdictions were consolidated as In re Dell Derivative Litigation into three actions. One of those consolidated
actions was pending in the Western District of Texas, Austin Division, but was dismissed without prejudice by an order
filed October 9, 2007. The second consolidated shareholder derivative action was pending in Delaware Chancery Court. On
October 16, 2008, the Delaware court granted the parties' stipulation to dismiss all of the plaintiffs' claims in the Delaware
lawsuit without prejudice. The third consolidated shareholder derivative action was pending in state district court in
Williamson County, Texas. These shareholder derivative lawsuits named various current and former officers and directors
as defendants and Dell as a nominal defendant and asserted various claims derivatively on behalf of Dell under state law,
including breaches of fiduciary duties. On September 11, 2009, Dell entered into an agreement to settle the derivative suit
pending in
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