Court documents reawaken Dell image issues

New allegations stemming from a three-year-old lawsuit that Dell tried to cover up trouble-prone computers could further damage the company's already tarnished reputation.

New allegations stemming from a three-year-old lawsuit that Dell tried to cover up trouble-prone computers could further damage the company's already tarnished reputation.

The allegations were first reported June 28 in The New York Times.

Citing recently unsealed court documents in a lawsuit filed by Advanced Internet Technologies, the article reveals Dell sold millions of desktop PCs between May 2003 and July 2005 knowing they had a defective part from Asian supplier Nichicon. The article also cites a source who said a PR policy was devised around the faulty computers, which included telling the media the problems posed no safety or data risk.

Dell responded to the Times' article with a statement to media, pointing out that Dell worked with customers to address the issue at the time, including with extended warranties. “The Nichicon issue is old news, and the implication that this situation affects Dell currently is incorrect,” it reads. “It is speculation that Dell was affected more than other companies.”

David Frink, senior manager, corporate affairs for Dell, tells PRWeek the company is responding to media and customer calls as a result of the Times' coverage. “Our sales team in the field are in communication and dialogue with our customers and responding to any questions that should arise,” he says.  “We're absolutely talking reactively and proactively with our customers on this subject.”

Dell's PR AOR is AxiCom. While Frink declined to reveal how the agency is assisting on this particular issue, he says “we work very collaboratively on issues from A to Z.”

Lynne Doll, president of PR firm The Rogers Group, says the PC maker could face an even tougher communications challenge than it did when the civil lawsuit was first filed.

“While the allegations that the company's computers broke down may be old news, the allegation that the company knew they would break and tried to hide it is really damaging. Consumers tend to be very forgiving when products fail, if they believe that the company responded appropriately,” says Doll. “But if consumers believe a company hid the truth and didn't act responsibly to try and fix the problem, their trust in that company is destroyed.”

The allegations also come at a time when Dell, once so successful its business model was taught at Harvard, has faced other crises, which collectively, says Doll, could suggest a company-wide problem with honesty and transparency.

The company recently settled a $17-million class action lawsuit for misleading customers about 0% financing. It also recently set aside $100 million for a potential settlement with the US Securities and Exchange Commission over questionable accounting practices. “Media and customers see these kinds of things as trends that point to a company's ethics,” says Doll.

To regain customer trust, she says Dell “has to demonstrate that it has taken dramatic steps to create a new corporate culture based on integrity and transparency. It needs to hold itself and its leadership accountable and address problems in an open, proactive way. It is what the company does—not just what it says—that can rebuild its reputation.”

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