Wednesday, June 30, 2010

The real cost of saving money.

Internal Dell documents indicate the company shipped 11.8 million computers  between 2003-2005 with potentially faulty motherboards using capacitors that could leak and cause the machines to fail.  According to an article in The New York Times, it appears Dell attempted to feign ignorance and sweep the issue under the rug.

It just crawled out.  Documents from a three-year-old law suit have recently been unsealed shedding light on this brand equity train wreck.

Unlike competitors who stopped shipping equipment with the faulty capacitors, Dell apparently kept pushing them out the door - mainly to large corporate customers.

It looks like Dell didn't exactly take the high road when the magnitude of the problem became known.  It's never good when employees send emails saying things like,  “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.”

Dell has already spent millions extending warranties and defending this suit.  Should Dell lose, they could be on the hook for a large penalty.  That figure will certainly be dwarfed by the long-term damage done to the Dell brand by this news.  The corporate customers who originally built the Dell brand will now have to think twice before specing the company's hardware.

I'm guessing the Dell manager who made the decision to try to keep a lid on this in the name of short-term cost containment had no idea he or she was making one of the biggest marketing decisions in the history of the company.

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