Court documents reveal that Dell ignored capacitor problems and knowingly sold faulty computers

Tue, Jul 6, 2010


Dell CEO Michael Dell famously opined many years ago that Apple should give shareholders their money back and close up shop. Since then, Apple and Dell have been on two completely different trajectories. As Apple continues to pile up money thanks to one revolutionary product after another, Dell has struggled to maintain the impressive profits it raked up just a few years ago.

And just when you thought things couldn’t get any worse, Ashlee Vance writes for the New York Times that Dell is in extremely hot water over selling faulty computers it had reason to believe were prone to malfunctioning.

In one particular example, Dell had sent the University of Texas a number of machines that began to malfunction when given difficult and processor intensive math calculations. As it turns out, the desktop PC’s sold to the University were replete with “faulty electrical components that were leaking chemicals and causing the malfunctions.”

But the University of Texas isn’t alone. Between 2003 and 2005, Dell sold millions of similarly deficient computers to the likes of Wal-Mart, Wells Fargo, and even the Mayo Clinic.

Documents recently unsealed in a three-year-old lawsuit against Dell show that the company’s employees were actually aware that the computers were likely to break. Still, the employees tried to play down the problem to customers and allowed customers to rely on trouble-prone machines, putting their businesses at risk. Even the firm defending Dell in the lawsuit was affected when Dell balked at fixing 1,000 suspect computers, according to e-mail messages revealed in the dispute.

Faulty capacitors, found on computer motherboards, were discovered to be the root of the problem, and while similar issues affected other hardware manufacturers such as HP and Apple, Dell in particular was plagued with bad capacitors. Court documents show that during a 2-year period, from 2003-2005, Dell shipped 11.8 million computers “that were at risk of failing” due to faulty components. Many of these machines were Dell’s OptiPlex models, Dell’s go-to machine for sales to business’s and government agencies.

An internal study by Dell revealed that 97% of Optiplex machines were expected to malfunction due to bad capacitors over a 3 year period. Compounding problems, Dell began replacing faulty motherboards with other problematic motherboards.

But Dell employees went out of their way to conceal these problems. In one e-mail exchange between Dell customer support employees concerning computers at the Simpson Thacher & Bartlett law firm, a Dell worker states, “We need to avoid all language indicating the boards were bad or had ‘issues’ per our discussion this morning.”

In other documents about how to handle questions around the faulty OptiPlex systems, Dell salespeople were told, “Don’t bring this to customer’s attention proactively” and “Emphasize uncertainty.”



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