Last week, we discussed
new documents that had been unsealed in Advanced Internet Technologies' ongoing lawsuit against Dell. The newly public evidence was fairly damning, as it showed Dell was aware that the Nichicon capacitors used in 2003-2005 OptiPlex
machines had an astonishing 97 percent failure rate according to the company's own internal study. When Dell
hired an indepedent contractor to evaluate the situation, the company reported 10x more failures than the OEM had previously estimated.
Lionel Menchaca, a spokesperson for Dell, has since written a rebuttal
to the various negative conclusions this new evidence supports. In it, he makes five specific points, which we'll address in turn. They are:
- This is an issue we addressed with customers some years ago. The Advanced Internet Technologies lawsuit is three years old and does not involve any current Dell products.
- Dell did not knowingly ship faulty motherboards, and we worked directly with customers in situations where the issue occurred.
- This was not a Dell-specific issue, but an industry-wide problem.
- Dell extended the warranty for up to five years for customers who had affected machines.
- This is not a safety issue.
One and three are uncontested. The suit refers to events of some years ago, the problems have all been resolved, and Dell wasn't the only company affected (although it may have been hit much harder than certain other OEMs). Five is a matter of debate.
The second and fourth points are a different matter. First, Dell claims it never knowingly
sold faulty components. AIT's primary complaint, however, isn't that Dell knowingly sold bad hardware, but that the company deliberately lied to its customers regarding what it knew about system failure rates. Menchaca's use of the word "knowingly," is also a bit of a dodge; In PR-speak, it's absolutely normal for a company to quietly, unofficially acknowledge a problem, while simultaneously denying that an issue exists.
See, those aren't official failures. Your eyes are deceiving you, unless Dell says so.
Next we've got the phrase "worked directly with customers." 'Worked with' doesn't mean "resolved to the customer's satisfaction;" AIT is noticably unsatisfied. In this context, 'worked with' could mean anything from "We delivered two thousand brand-new Optiplex systems within 24 hours," to "we let you attempt to explain the situation to one of our fine customer service reps for six hours straight."
Finally, there's the issue of the extended warranty. Again, no one is arguing that Dell didn't extend it out to five years for customers with affected machines, but who got to decide if a machine was affected? Dell. The same company which allegedly instructed its sales staff to blame failures on anything but
the motherboard, and who instructed them to "emphasize uncertainty." Dell representatives are on record warning other staff not to talk about the issue, even obliquely. In one email that went out to customer support, a Dell worker stated: "We need to avoid all language indicating the boards were bad or had ‘issues’ per our discussion this morning."
You're Doing It Wrong
Companies faced with this sort of disaster always have two choices: Go public, or attempt to cover it up. Time and time again, the companies that attempt to stonewall end up taking a more severe beating than those who admit the problem. Dell's choice to emphasize uncertainty was prophetic; corporate customers that feel they can't trust their preferred system provider waste no time finding different solutions.
The financial impact to Dell if AIT wins or settles its lawsuit will be minimal, but the indirect affect on business relations could be significant. Thanks to AIT's lawsuit, we have a window into how Dell dealt with a major technical problem with major implications for the company's bottom line from 2003-2005. Faced with a disaster that could cripple several million customers (Dell sold an estimated 11.8 million OptiPlex systems during this time period), Dell cut its losses, threw its customers under a bus, and point-blank lied about its knowledge of a problem. That's not the best way to instill confidence in ones clientele, and it doesn't engender brand loyalty.