The class-action lawsuit filed against Dell Computer on Wednesday makes a complex case, and does not provide much evidence to back up some of its principal pillars other than citing Internet blogs and press reports. Intel is involved, though only peripherally. There are leaps of logic one must take to accept its premises. But whatever the case's outcome, it has already damaged Dell - CEO Kevin Rollins is gone, and Michael Dell is stepping in, perhaps permanently, to run damage control.

There are 241 pages of allegation, but once the long citations of blogs and financial analysts' reports are excised, it's easier to boil down the Dell shareholders' case against their company: The story begins in late 2002, when Dell began a cost-cutting program not unlike so many other companies in the computing field. But the suit alleges the cuts directly and substantively impacted the company's production and service capabilities in ways that the company failed to report.

Many executives, the suit details, sold off between 90% and 100% of their personal stock holdings, with Rollins allegedly selling 98.6% of his personal holdings in Dell Computer - figures such as this were not attributed and have not been verified.

The suit goes on to link a share repurchasing program by Dell Computer, which helped drive company stock value up about 90%, to the alleged scheme by executives to sell stock and cash in. They allegedly managed to complete this selloff just before the Japanese government filed charges against Intel in early 2005 for improperly giving rebates to customers who purchased processors in large quantity, issuing recommendations with which Intel has since vowed to comply. One of those customers was Dell. At that time, the news helped precipitate a stock value decline of 65%.

Mention is also made of the options backdating practice, evidence of which apparently was revealed by a US Securities and Exchange Commission investigation. The suit alleges that Dell executives used false information to help inflate their stock value, then used backdated options to purchase shares prior to their decline in value. Though the suit does not state this explicitly, apparently the shares purchased through exercising options were among those the executives then sold again in massive quantity.

Between 2002 and 2005, the suit claims, Dell made drastic and painful cuts in its production and service operations, leading to a marked decline in quality and a sharp reversal of customer opinion of its service. Frequently, the complaint cites the notorious problem with the exploding batteries in Dell notebooks (batteries manufactured by Sony), as evidence that Dell failed to implement the types of quality controls over its production line that were once critical to the company's original "Dell Direct" business model.

For any normal company, the downturn in customer appreciation and satisfaction, coupled with higher costs associated with addressing warranty issues, would lead to reduced revenues, which would then probably trigger stock price declines. But Dell padded those losses, the class-action suit alleges, using revenues gained from Intel rebates for Dell's having purchased its processors exclusively during that period, and not AMD's.

As evidence, the suit cites AMD's pending US antitrust lawsuit against Intel, though no findings of fact with regard to AMD's allegations there have yet been issued. The suit also details the story of the Japanese government's prosecution of Intel business practices, though no evidence is provided showing that Dell specifically profited from Intel's Japanese practices, which is interesting since both are American companies, and thus the counterclaim could be made that the Japan matter has no bearing here.

The suit alleges Intel provided Dell with rebates knowing full well how Dell intended to report the revenues. However, it's important to note that the suit claims Dell did report the revenue, not that it failed to do so.

"These defendants employed devices, schemes and artifices to defraud," the complaint's concluding paragraphs read. "While in possession of material adverse non-public information, they engaged in acts, practices, and a scheme as alleged herein in an effort to assure investors of Dell's business and financial success and prospects for continued substantial growth. This included the making of, or the participation in the making of, untrue statements of material fact and concealing facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

"This conduct artificially inflated the prices of Dell publicly traded securities and operated as a fraud and deceit upon the purchasers of Dell publicly traded securities," the complaint continues, "proximately causing them economic loss and damage as, through a series of disclosures beginning in [March 2005], the prior misrepresentations and other fraudulent conduct of defendants became apparent, i.e., the truth entered the market and the artificial inflation in Dell's stock price came out as the stock price collapsed to as low as $20.65 per share."

This is how the suit evaluates damages, as a loss of shareholder value between the time in December 2004 when Dell stock sold for $42.50 per share, to the period in 2005 when stock sold for $20.65. During that period, Dell executives cashed in about 98.9 million shares of stock, for what the plaintiff's accountants quantify as $3.32 billion in total value distributed to company executives.

What the lawsuit does not address, however, is how much Dell stock value would have been worth had the alleged misdeeds not been done, and had Dell been more forthcoming about the allegedly true reasons for its downturn in revenues. Conceivably, stock value would still have dropped, in which case shareholders could still be angry.

Since the lawsuit did make clear its allegation that the gain in Dell stock value was artificial, a court could reasonably conclude that the subsequent loss was just as ethereal. In which case, the plaintiffs' case for damages may not be so clear cut, even if their allegations were to be proven true.

Dell has issued no comment thus far. Intel issued a statement earlier today saying it believes, on first read of the complaint, that the charges against Dell, Intel, and Dell's accountants were "completely made up."