Documents show beleaguered Dell was aware of bad components in millions of faulty PCs they peddled

MacBook Pro“After the math department at the University of Texas noticed some of its Dell computers failing, Dell examined the machines. The company came up with an unusual reason for the computers’ demise: the school had overtaxed the machines by making them perform difficult math calculations,” Ashlee Vance reports for The New York Times.

“Dell, however, had actually sent the university, in Austin, desktop PCs riddled with faulty electrical components that were leaking chemicals and causing the malfunctions,” Vance reports. “Dell sold millions of these computers from 2003 to 2005 to major companies like Wal-Mart and Wells Fargo, institutions like the Mayo Clinic and small businesses.”

MacDailyNews Take: Hey, who needs quality computing at the Mayo Clinic? (dripping sarcasm)

Vance reports, “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.”

MacDailyNews Take: Wonder if any of those POS Dells that Dell employees knew were faulty ever put anyone’s life at risk?

Vance reports, “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.”

MacDailyNews Take: You cut enough corners, you end up like Dell.

Vance reports, “For the last seven years, the company has been plagued by serious problems, including misreading the desires of its customers, poor customer service, suspect product quality and improper accounting. Dell has tried to put those problems behind it. In 2005, it announced it was taking a $300 million charge related, in part, to fixing and replacing the troubled computers. Dell set aside $100 million this month to handle a potential settlement with the Securities and Exchange Commission over a five-year-old investigation into its books, which will most likely result in federal accusations of fraud and misconduct against the company’s founder, Michael S. Dell.”

“A study by Dell found that OptiPlex computers affected by the bad capacitors were expected to cause problems up to 97 percent of the time over a three-year period, according to the lawsuit,” Vance reports. “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.'”

Vance reports, “In 2007, Dell restated its earnings for 2003 to 2006, as well as the first quarter of 2007, and lowered its sales and net income totals for that period. An audit revealed that Dell employees had manipulated financial results to meet growth targets.”

Read more in the full article here.

MacDailyNews Take: SIDAGTMBTTS.

[Thanks to MacDailyNews Reader “Joe Architect” for the heads up.]

43 Comments

  1. “”Dell, however, had actually sent the university, in Austin, desktop PCs riddled with faulty electrical components that were leaking chemicals “

    ‘MacDailyNews Take: Hey, who needs quality computing at the Mayo Clinic? (dripping sarcasm)’

    Also dripping chemicals.

  2. Micheal Dell: “FULL STEAM AHEAD!!!”

    Damn the customers!
    Damn the government!
    Damn the company!

    Ram that ship called Apple!

    Jaws drop as Dell shovels coal and Steve Jobs engages the Warp Drive!

  3. When you can’t keep up and you whip your employees to ‘make the numbers’, guess what?

    Corners get cut and lies get told.

    These stories are repeated over and over in companies that are on the verge of failing. Why any CEO ever allows this to start is beyond me as it generally causes a collapse of the company’s market share at the least.

    Michael Dell was never trained as a CEO and never mentored under a gifted manager, and it now shows just how limited his abilities were. I suspect we are nearing the last of his reign.

  4. My company has been using HP for the last 18 years. During the same time period, specifically the HP Vectra VLi8 and VL400 had the exact same problem. HP shipped us, free of charge, several hundred replacement motherboards. Since we do our own repair work. It was later shown that some chinese manufactures of caps stole a defective formula for the liquid that is inside, that could not stand up to long term use, expanded into gas, and leaked out. HP, Dell, and I know for a fact Gateway (e1000) were victims of this scam. I have motherboards from SuperMicro, and ABIT that also did the same thing.

    If anyone is to complain about Dell, it’s how they handled the situation. The rest of the companies, at least HP, owned up to the issue and replaced the defective parts as they were determined to be defective, without haste or complaint.

    I am not aware of any Apple parts having the same issue, but Apple may have also fallen victim to this problem. It was very very industry wide and well known during those years.

    I say give Dell a break on this one. (I am not a fan of Dell) Let’s be fair about it.

  5. “Why any CEO ever allows this to start is beyond me…”

    Well, actually it generally starts with the CEO. The first big success, the ego expands and hubris kicks in big.

    Everyone else follows the Boss and cynical naysayers (usually those closest to the numbers like in the finance function) are shunned and at times put into some outpost in the wilderness…

    It is not easy to get close to, let alone mentor, a person “who is full of it”.

  6. Employer repairs most major brands, including Dell and Apple. The entire industry got bit by a massive batch of faulty capacitors, and yes, Apple got them too. Anyone not believing Apple didn’t know eMacs and iMacs were popping caps left and right simply isn’t in the service industry, yet Apple kept selling these computers, just as everyone else did.

  7. @Moo You are only half correct yes apple had units in the supply chain after they found out about the caps but quickly made the needed changes and extended coverage on units sold with the issue. Dell kept selling known faulty units long after the issue was known and gave clients a hard time with repairs.

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