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By | Dan Goodin 22nd November 2010 19:27

Dell kept buyers in dark over hardware problems, say docs

Ranked customers by importance

Recently released court documents show that Dell resisted informing customers of widespread hardware problems that render many of the computers it sold from 2003 to 2005 inoperable.

The hundreds of pages of documents were unsealed by the federal judge hearing a lawsuit filed by former Dell customer Advanced Internet Technologies, according to The New York Times, which reviewed the release. Some of the documents show Dell salespeople and technicians were encouraged to keep customers in the dark about the known defects in the capacitors contained on computer motherboards. As a result, the components often overheated, causing the devices to malfunction or stop working altogether.

As Dell was forced to deal with the the problems, it began ranking customers by importance, the NYT said. At the top of the list were those customers who might move their accounts to another PC maker, followed by those who might curtail sales. Dell gave the lowest priority to those who were bothered but still willing to stick with the company.

The company declined to recall the systems and did what it called “proactive field replacements” for customers that met certain sales and failure rate thresholds.

The documents show an escalating number of malfunctions that grossly exceeded the company's projections, even as Dell sought to keep them quiet.

According to the documents, the City of New York filed incident reports with Dell on 20.2 percent of a batch of 5,000 computers purchased from 2003 to 2005. A purchase of 2,800 computers by Microsoft resulted in issues with 11 percent of the machines; General Electric, William W. Backus Hospital, Denison University and the Montana Justice Department were among dozens of other organizations that experienced similar results.

In June 2004, Dell's internal projections called for a minimum of 12 percent of its SX270 Optiplex computers to result in incident reports from customers over a period of three years. By September, Dell raised the minimum incident report forecast to 45 percent and said it might run as high as 97 percent.

Dell settled the legal dispute with Advanced Internet Technologies in September, a month after court filings in the case claimed Dell officials hid emails that showed its top executives in the mid-2000s knew the company was shipping millions of defective computers.

Dell executives noted that the capacitor problems were an industry wide issue and that no other computer manufacturers issued recalls either. They say they have put new procedures in place to prevent such problems with capacitors. ®

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