Dell Speaks About Its Struggles With Faulty PC Components

Dell Speaks About Its Struggles With Faulty PC Components
By ASHLEE VANCE
Copyright by The New York Times
July 1, 2010, 5:46 pm
http://bits.blogs.nytimes.com/2010/07/01/dell-speaks-about-its-struggles-with-faulty-pc-components/?th&emc=th

Dell has reached out to its customers two days after The New York Times ran an article detailing the company’s intense struggles with millions of PCs that had been plagued by faulty components.

In a blog post, the PC maker acknowledged that bad capacitors on the company’s computers caused problems for customers “some years ago.” A company spokesman added that “Dell did not knowingly ship faulty motherboards, and we worked directly with customers in situations where the issue occurred.”

The response from Dell comes as a lawsuit filed against the company over the faulty computers nears trial.

Advanced Internet Technologies, a North Carolina-based Internet services company, has accused Dell of misleading customers about the issues affecting Optiplex desktop computers. In its lawsuit, A.I.T. said that Dell employees knew about the problems with capacitors lining the motherboards of the computers, and that Dell employees tried to hide the issues from customers.

Documents recently unsealed in the lawsuit show that Dell ran numerous studies about the capacitors and found they affected at least 11.8 million computers sold between 2003 and 2005.

A.I.T.’s case against Dell is scheduled to go to trial on Oct. 18, with A.I.T. seeking about $40 million in damages. That total could be trebled under North Carolina state law if A.I.T. can prove that Dell relied on unfair and deceptive trade practices.

Dell does not appear to have disclosed the presence of this lawsuit in its regulatory filings.

As Dell pointed out, the bad capacitors affected a number of PC makers.

Early this decade, technology publications like Passive Components Industry Magazine and IEEE Spectrum documented the prevalence of faulty capacitors in the computer industry. They reported on tales of stolen capacitor recipes gone wrong and rampant computer failures.

By 2003, Dell, Hewlett-Packard and Apple received another bad batch of capacitors on their motherboards, this time from the Japanese supplier Nichicon.

“The faulty Nichicon capacitors affected many manufacturers, including Hewlett-Packard, Apple and others, as discussed in the initial story and several blog posts afterward,” Dell wrote on its blog. “Again, this was an industry-wide problem. Dell suspended use of Nichicon capacitors after we discovered a problem in its manufacturing process.”

But H.P., Dell’s main rival, shipped the bad capacitors only on its niche Compaq D530 UltraSlim computer. H.P. stopped shipping the faulty computers by March 2004.

Documents in the A.I.T. lawsuit show that Dell shipped the faulty capacitors on its mainstream business PC line and sold millions of the computers from 2003 to late 2005.

Dell’s own documents, unsealed in the A.I.T. lawsuit, state that it discovered the bulging capacitors in January 2004. By May 2005, Dell continued to investigate problems as complaints from customers like Wal-Mart arrived. Over this period of time, Dell received three bad batches of capacitors, according to the documents.

By September 2005, Dell was still investigating the matter and found that its SX720, GX270 and GX280 computers were all causing problems.