Dell 2010 Annual Report Download - page 98

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Chad Brazil and Steven Seick v Dell Inc. — Chad Brazil and Steven Seick filed a class action suit against Dell in March 2007 in the
U.S. District Court for the Northern District of California. The plaintiffs allege that Dell advertised discounts on its products from
false "regular" prices, in violation of California law. The plaintiffs seek compensatory damages, disgorgement of profits from the
alleged false advertising, injunctive relief, punitive damages and attorneys' fees. In December 2010, the District Court certified a
class consisting of all California residents who had purchased certain products advertised with a former sales price on the consumer
segment of Dell's website during an approximately four year period between March 2003 and June 2007. The Court of Appeals is
currently considering Dell's request for an interlocutory appeal of the certification order. Dell disputes the claims and is vigorously
defending the case. The ultimate resolution of this matter and the associated financial impact to Dell, if any, remain uncertain at this
time.
Other Litigation — The various legal proceedings in which Dell is involved include commercial litigation and a variety of patent
suits. In some of these cases, Dell is the sole defendant. More often, particularly in the patent suits, Dell is one of a number of
defendants in the electronics and technology industries. Dell is actively defending a number of patent infringement suits, and several
pending claims are in various stages of evaluations. While the number of patent cases has grown over time, Dell does not currently
anticipate that any of these matters will have a material impact on Dell's financial condition , results of operations, or cash flows.
Other Matters — In the second quarter of Fiscal 2011, Dell became aware of instances in which certain peripheral product sales
made to U.S. federal government customers under Dell's General Services Administration ("GSA") Schedule 70 Contract were not
compliant with contract requirements implementing the Trade Agreements Act. Dell self-reported the discovery to the GSA's Office
of the Inspector General and has presented a report of its findings which conclude that less than $1 million of non-compliant
products may have been sold. Dell continues to work with the GSA's Office of the Inspector General to reach final resolution of this
matter with that office .
While Dell does not expect that the ultimate outcomes in these proceedings or matters, individually or collectively, will have a material
adverse effect on its business, financial position, results of operations, or cash flows, the results and timing of the ultimate resolutions of
these various proceedings and matters are inherently unpredictable. Whether the outcome of any claim, suit, assessment, investigation, or
legal proceeding, individually or collectively, could have a material effect on Dell's business, financial condition, results of operations, or
cash flows will depend on a number of variables, including the nature, timing, and amount of any associated expenses, amounts paid in
settlement, damages or other remedies or consequences. Dell accrues a liability when it believes that it is both probable that a liability has
been incurred and that it can reasonably estimate the amount of the loss. Dell reviews these accruals at least quarterly and adjusts them to
reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information
is obtained and Dell's views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes
in Dell's accrued liabilities would be recorded in the period in which such determination is made.
Certain Concentrations — Dell's counterparties to its financial instruments consist of a number of major financial institutions with credit
ratings of AA and A by major credit rating agencies. In addition to limiting the amount of agreements and contracts it enters into with any
one party, Dell monitors its positions with, and the credit quality of the counterparties to, these financial instruments. Dell does not
anticipate nonperformance by any of the counterparties.
Dell's investments in debt securities are in high quality financial institutions and companies. As part of its cash and risk management
processes, Dell performs periodic evaluations of the credit standing of the institutions in accordance with its investment policy. Dell's
investments in debt securities have effective maturities of less than five years. Management believes that no significant concentration of
credit risk for investments exists for Dell.
94