Monday, July 10, 2006

Blazing laptops leave Dell with image woes

Blazing laptops leave Dell with image woes
By Damon Darlin The New York Times
Copyright by The New York Times
Published: July 9, 2006

A Dell notebook computer that burst into flames last month in Osaka, Japan, has damaged more than just the conference table where it sat smoldering.

The incident, publicized by photos on the Internet, has also hurt Dell's recent attempts to improve its image.

The company said the incident got more publicity than such incidents usually get when they happen to other manufacturers. In part, that is because Dell's reputation for responsive customer service was already under attack after the company, the world's largest PC manufacturer, started to cut costs at its call centers last year.

Photographs of the flaming and smoking notebook were posted on a technology news Web site called The Inquirer on June 21. The material was passed around to other Web sites and blogs. It was also the subject of a brief story that ran later that day on the Dow Jones Newswires.

Two days later, Cindy Shaw, a securities analyst with Moors & Cabot, notified her clients about the publicity. Last Thursday, citing reports of a second smoking laptop, this one in Pennsylvania, she advised them that "should this story also hit the mainstream press, we believe there is headline risk and potentially negative demand ramifications for Dell."

Bob Pearson, vice president of Dell's corporate group communications, called her reaction "somewhat irresponsible." Shaw said neither she nor her company had made any financial bet that the company's stock would fall. She did, however, recommend that clients sell the company's stock.

But so far, Dell's stock has been unaffected. It closed Friday at $23.87, up almost 1 percent since June 21.

Meanwhile, Dell said its engineers concluded the fire was caused by a faulty lithium ion battery cell, but that the problem was unrelated to a recall last year of notebook batteries by Dell and several other computer makers.

"It's very, very rare to have a thermal incident," Pearson said.

Dell said it found no pattern of battery failure and said the Pennsylvania incident publicized by the Inquirer Web site was caused by a chip problem and not batteries.

The company also steered reporters to a statement by Norm England, chief executive of the Portable Rechargeable Battery Association, that said, "based on the millions of lithium ion batteries in use today and the exceptionally small number of cases in which a battery malfunction has occurred, we believe these batteries are safe and reliable."

But for any company trying to repair its image, any bit of bad news hurts.

Pearson said the customer with the melted notebook was given a new one.


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