Dell Under Fire Again over OptiPlex Failure Issue

Court documents released Nov. 18 backed up earlier claims that Dell officials did not warn customers about widespread OptiPlex problems between 2003 and 2005.

The issues of faulty PCs and Dell's slow response to dealing with them are finding their way back into the news.

Documents released by a Federal District Court judge in North Carolina Nov. 18 gives greater details to accusations that Dell officials tried to hide issues surrounding faulty OptiPlex PCs sold to a wide range of businesses, government agencies and educational institutions between 2003 and 2005, according to a report in The New York Times.

According to the court documents, which are part of the lawsuit that AIT (Advanced Internet Technologies) filed against Dell in 2007, the PC maker replaced the motherboards of 22 percent of the 21 million OptiPlex systems-the GX280, GX270 and SX270-that it sold during those two years. The motherboards needed to be replaced due to faulty capacitors, which came from third-party suppliers.

The part of the story that is continuing to haunt Dell is the contention that people within the company knew about the issues, but hid the extent of the problem from its customers while continuing to sell them.

In the case of AIT, company officials said that in 2003 and 2004, they bought more than 2,000 OptiPlex desktops from Dell, which at the time knew of the problems yet still continued to sell the systems. An internal audit conducted by AIT after the problems began to arise found that all of the OptiPlexes sold to them by Dell were faulty. When AIT officials brought the problems to Dell, the PC maker offered a warranty support program that included motherboard replacements, rather than recalling the failed PCs.

AIT sued Dell in 2007, and reportedly settled with Dell in September. Terms of the settlement were not disclosed, according to The New York Times.

The paper reported that the court documents offered numerous incidents in which Dell customers saw widespread failure of their OptiPlex systems. For example, the city of New York bought 5,000 PCs during those two years and had problems with more than 20 percent of them. Microsoft had problems with 11 percent of the 2,800 PCs it bought.

The documents also indicated that Dell officials were reluctant to inform customers of the motherboard problems, even though they were getting flooded with reports about the issues. According to the paper, Dell salespeople and technicians were pressured to keep quiet about the problems and not tell customers.

Dell even went so far as to triage their customers, ranking them by importance depending on how likely they were to leave Dell for another vendor.

Dell and other PC makers, including Hewlett-Packard and Apple, saw some of the computers they sold to customers fail because of faulty capacitors sold by component makers in Asia. Capacitors are used to help regulate the electricity inside the systems, and the faulty capacitors would bulge when they got too hot, causing the PCs many times to fail.

However, while most PC makers-including Dell-tried to track and isolate the problem and either replace or fix the failed PCs, Dell continued to use bad capacitors, according to The New York Times. The report said that the court documents show that Dell officials felt that, despite the large number of OptiPlex systems failing, the issue did not rise to the level of recalling PCs, but instead only of replacing the motherboards.

Dell reportedly took a $300 million charge in connection with the fixing or replacing of failed computers, The New York Times reported.

A Dell spokesman told the Times that the PC maker replied properly to the issue.

"Dell actively investigated failures, we fixed computers that suffered a capacitor issue, and we extended the warranties on all the possibly affected motherboards," the spokesman said.

Though AIT filed the lawsuit against Dell in 2007, the case garnered a lot of attention this summer due to reports regarding Dell's reluctance to tell customers about the failures at the time they were happening.