Unsealed court papers show that system builder giant Dell shipped 11.8 million computers from May 2003 to July 2005 with faulty components.
The defective OptiPlex desktop systems are the subject of an upcoming suit filed against Dell by Advanced Internet Technologies. Case files were subsequently unsealed and documented in a major New York Times article earlier this week.
The documents reveal that an internal Dell study found its OptiPlex desktop motherboards were built on capacitors that almost invariably leaked with the resulting chemicals causing major damage and systems failure. Such was the problem that within three years 97 percent of the desktops would fail.
The company had been made aware of the problem with the faulty components from Asian supplier Nichicon, but failed to issue a recall. The New York Times reported that Dell hired a contractor to assess the failures and was told that ten times as many systems as Dell estimated were prone to fail and that problems were made worse by repairing systems with faulty mainboards.
Most damning of all are the documented cases of customer deception and a refusal to address the problem with the company's major clients, some having bought thousands of desktops which failed near simultaneously. Ironically even Dell's defending law firm was struck by the problem when Dell disputed 1,000 faulty desktops according to e-mails revealed in the court documents.
Dell for its part has been downplaying the issue, pointing out that the lawsuit is 3 years old and relates to computers shipped even prior to that and that no current models that Dell manufacturers are involved. A Dell spokesman also told eWeek "Faulty Nichicon capacitors affected many manufacturers. It is speculation to suggest that Dell was affected more than other companies."
However it's not the capacitors which will be most damaging to Dell but the exposure of the internal practices which refused to deal with the problem, leaving many of the system builder's major corporate clients left in the lurch with thousands of failing systems.
The New York Times reported one e-mail exchange between Dell customer support employees where a Dell worker said, “We need to avoid all language indicating the boards were bad or had ‘issues’ per our discussion this morning.”
Other damning e-mails show that Dell salespeople were told, “Don’t bring this to customer’s attention proactively” and “Emphasize uncertainty.” If relating to mere system failures these would be bad enough but the capacitor issue has also been described as a potentially dangerous risk of fire by investigating computer experts.
The public relations ramifications of the court case will be unwelcome news to the company which has been trying to rebuild its reputation following the $300 million charge it booked to deal with the issue which has still not been fully resolved. This is on top of ongoing negotiations that Dell has begun with the SEC financial regulator to settle allegations of financial misconduct relating to the company's relationship with Intel.
Only a week ago Dell CEO Michael Dell told a group of financial analysts “We are feeling much better about our outlook this year in our commercial business, which is the bulk of our business” before describing signs of a new hardware refresh cycle among corporate clients due to the release of Windows 7.
It remains to be seen if following this week's extensive press coverage relating to the court case whether the mooted corporate hardware refresh will benefit Dell as much as it would like.