Spotlight Falls on Dell

By Nicholas Kolakowski  |  Posted 2010-06-30 Print this article Print


Nonetheless, public focus on the issue could hurt Dell, according to analysts.

"The problem for Dell is one of image, and the reason this is being done is to force Dell to the table to settle for a big number," Rob Enderle, principal analyst of the Enderle Group, told eWEEK June 30. "In effect this is legal blackmail and, unfortunately for Dell, a very textbook and successful strategy."

Enderle added, "Even though the problem is half a decade old, it reflects on the company's brand and image badly as long as it is in ink, and it is in the plaintiff's best interest to keep it in barrels of ink." Engaging AIT in open court, he said, would ultimately be the best solution: "The judgment will likely be far less and the combination of litigation cost and return become unattractive to other potential litigants."

It would also serve as a very public sign that Dell continues to clean its house and address issues.

But whatever the final outcome, Enderle wrote, the lesson for Dell and other companies is clear. "This does showcase the risk associated with trying to cover up a problem and becoming excessively cost-focused." The ramifications go far beyond IT: "This issue was caused by the same kind of decisions that led to the BP oil spill and the initial inadequate response. Excessive focus on reducing costs and a big attempt to contain the bad news created a big problem and made it much worse."

Now, the longer the trial, the more ink generated over Dell's corporate issues.

"Once the trial's under way, there'll be contentions of fact right along the line," Roger Kay, an analyst with Endpoint Technologies Associates, told eWEEK June 30. "Some of the details are things that only AIT could verify. It could be pretty nasty."

One point in Dell's favor, Kay said, was the lack of a true catastrophe related to the faulty capacitors. "A capacitor leaking, that could potentially cause ignition, which could lead to toxic fumes; you breathe those fumes and something bad happens," Kay said. "That's the sort of thing attorneys like to see. But here, that sort of smoking gun doesn't really exist."

AIT does cite economic losses, however, from the "high incidence of failures" associated with the 2,000 OptiPlex PCs it purchased from Dell. The lawsuit alleges OptiPlex failures at other companies, including Wal-Mart, the Mayo Clinic, Wachovia, Merrill Lynch, the University of Texas and a law firm retained by Dell.

Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.

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