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Wed, Jul 12, 2006 - Page 10 News List

Smoking laptops harming Dell's image

BATTERY PROBLEMS A well-publicized exploding portable PC has hurt the company's recent efforts to revitalize its much-maligned service sector

NY TIMES NEWS SERVICE , NEW YORK

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 in 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 do 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. Dell, reacting to the savaging it has received on blogs and Web sites over the cuts, recently responded with a program to spend more than US$100 million to improve service.

Photographs of the flaming and smoking notebook were posted on a technology news Web site called the Inquirer on June 21. The story was passed around to other Web sites and blogs like Consumerist.com. It was also the subject of a brief article carried 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 for corporate group communications at Dell, called Shaw's reaction "somewhat irresponsible."

Shaw said neither she nor her firm had made any financial bets that the company's stock would fall. She does, however, recommend that clients sell the stock.

So far, though, Dell's stock price has been largely unaffected.

Dell said its engineers examined and tested what remained of the flaming notebook computer for several days to find the source of the problem. They concluded that 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 the company and several other computer makers.

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

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

The company also directed reporters' attention 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."

He also said that more than 2 billion lithium ion cells would be manufactured this year.

For any company trying to repair its image, any bit of bad news hurts. Teresa Valdez Klein, who has commented on Dell's customer care troubles before on the Blog Business Summit Web site, compared Dell's public relations problems to those of Britney Spears.

"The blogosphere latches onto the story and runs with it -- drowning out anything good or redeeming that the company might say," she wrote.

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