Accounting issues least of Dell's problems

It is absolutely amazing that Dell Inc. (NASDAQ: DELL) shares have held up in the $23 range. This company is so flawed and will eventually takes its numbers for 2007/2008 down.

Now the company has to account for some irregularities in its accounting practices and probably restate its past earnings numbers. Back in September, Dell said some issues included the company under-reserving dollars to cover warranties and the true potential costs of those warranties. This, in essence, allowed profit numbers to be inflated as those under reserved dollars went directly to the bottom line. The CFO in charge during this tenure is gone, so the new CFO Don Carty gets a pass on these infractions. In yesterday's announcement about delaying its 10-K filing, the errors and possible misconduct were not specified.

Dell has bigger issues to grapple with though. First and foremost is Hewlett-Packard Co. (NYSE: HPQ) capturing market share from a struggling Dell. Dell may have to resort to pricing pressure to try and recapture the lost share. This will bode poorly for already thin gross margins and of course, operating margins.

Dell has its old CEO and founder, Michael Dell, back at the helm. It will take him a few quarters to figure out the right strategic moves before Dell regains its mojo. As I have stated before, PC hardware margins are thin to begin with, and I don't see why any investor would want to own these shares at this point.

Dell stock is more interesting as a $15-17 stock than here at $23. There is no momentum in front of Dell, just numbers and expectations going lower first.

Georges Yared is the chief investment officer of Yared Investment Research; Please visit www.georgesyared.com