Lawsuit: Dell covered up faulty computer issues

When a batch of bad capacitors put millions of Dell computers at risk for failure, the company made excuses and tried to hide the problem's true nature, according to a lawsuit.

Dell later took out a $300 million charge in part to fix the OptiPlex desktop computers, released between 2003 and 2005, but the lawsuit filed by Advanced Internet Technologies continues to haunt the company. Documents related to the case were unsealed this month and paint an unflattering picture of Dell.

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The New York Times, reporting on the documents, says Dell employees were aware of the problems, which stemmed from faulty capacitors coming out of Asia. This issue affected other computer companies as well, but Dell was hit the hardest. Between May 2003 and July 2005, an estimated 97 percent of OptiPlex computers -- 11.8 million of them -- were prone to problems, including leaked chemicals and malfunctions.

But instead of coming clean, documents in AIT's lawsuit show that Dell employees downplayed or covered up the problem. "Don’t bring this to customer’s attention proactively” and “Emphasize uncertainty" were among the instructions given to customer support. "We need to avoid all language indicating the boards were bad or had 'issues' per our discussion this morning," said one e-mail exchange between support representatives.

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AIT's lawsuit claims that Dell pinned the blame on AIT for using the computers in hot, confined spaces and working them too hard. The lawsuit also contends that affected computers lost data, a claim that Dell denies.

The Times takes this fiasco, and the resulting lawsuit, which hasn't gone to trial, as a highlight of Dell's decline. Once the world's largest computer vendor, Dell slipped behind HP in 2006 and now sits in third place, behind Acer as well. Analysts, meanwhile, generally agree that Dell lost market share by moving too slowly from desktops to laptops.

I think it's a tough line to draw between the lawsuit and lost market share, but I suppose the common bond in both cases is that Dell failed to listen to its customers. That never goes over well.

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