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Dell agrees to pay former CEO $48 million

Some sympathized with Kevin Rollins for leaving Dell with only $5 million, but he's $48 million richer once SEC wraps up investigation into Dell's accounting.

Editors' note: This blog initially misstated the price per share of former CEO Kevin Rollins' stock options had he been able to exercise them. The correct price is $28.67. The story should also have included that Rollins' stock options had vested prior to his leaving the company.

Kevin Rollins supposedly walked away from Dell with a measly $5 million payout. Turns out Dell's former CEO is pocketing nearly 10 times that amount.

Dell said in an 8K report filed on Wednesday that once the company finally files an annual report, it intends to pay Rollins $48.5 million. The money comes in the form of a payment in lieu of stock options, the company said in the report.

Rollins, who resigned on Jan. 31, had accumulated 7.3 million shares of Dell stock options since arriving in Round Rock, Texas, in 1995. According to the company, he could exercise his vested options 90 days after he left the company, which came on Aug. 2. Dell couldn't allow him to cash out because the company is under investigation by the Securities and Exchange Commission and is trying to sort out questions over its accounting.

Instead, Dell entered into an agreement to pay Rollins the $48.5 million, which represents the value of his stock options if he had been able to exercise at the price of $28.67, according to David Frink, a Dell spokesman. The price Dell agreed to pay was the average price that Dell shares closed at the week before Rollins' stock options expired.

Dell compensated 400 other current and former employees whose stock was vested and had expired in the same way, Frink said.

When Rollins stepped down, some publications expressed sympathy over his payout. The Register called it a "slap in the face" considering that Hewlett-Packard sent former CEO Carly Fiorina off with $21 million.

Dell's stock price grew after Rollins initially took over in 2004. After topping out at about $42 in Jan. 2005, the stock started a descent and the price has remained below $30 since April 2006.

On Rollins' watch, Dell also came under SEC scrutiny and lost market share to HP.

It might be hard for anyone to feel sorry for Rollins now.