Dell hit by $1bn lawsuit over alleged kickbacks

Michael Dell, who this week returned to day-to-day control of the troubled computer maker that bears his name, has been slapped with a lawsuit alleging he and the company benefited from billions of dollars in kickbacks from the chip maker Intel.

America's highest-profile class action lawyer, Bill Lerach, filed a suit against Dell, its directors and the accountants PricewaterhouseCoopers, alleging that the company used the payments to prop up quarterly profits.

The central claim is that Intel gave Dell steep discounts in return for freezing out rival chip makers, particularly Advanced Micro Devices. Several investors have argued that Dell's refusal - until last year - to use AMD chips was one reason why it has ceded market leadership to Hewlett-Packard.

Dell's collapsing market share triggered another profits warning this week and led to the ousting of the company's chief executive, Kevin Rollins. Mr Dell has now added the chief executive role to his job of chairman.

The suit claims Dell received payments from Intel worth about $1bn (£508m) a year. The payments were spread out unevenly over the four quarters, the complaint alleges, and Dell became dependent upon the money. As it was paid at, or near, the end of Dell's quarters, it had a "direct, material impact" on the computer maker's operating profits.

The suit also claims Intel insisted that the computer maker maintain secrecy about the payments because it feared competition officials would take legal action against it. Dell declined to comment on the allegations.

Intel has denied it paid kickbacks to secure business from Dell. A spokesman said most of the allegations "rehash" those made in the legal battle with AMD, while other claims in the lawsuit appear to have been "made up".