Dell Inc said New York State Attorney General Andrew Cuomo plans to file a lawsuit over the second-largest personal-computer maker's customer practices.
The state claims Dell misleads consumers with its financing offers and fails to honor warranties, service contracts and rebates, according to a copy of the 28-page complaint obtained by Bloomberg News.
Jeffrey Lerner, a spokesman for the New York Attorney General's office, declined to comment yesterday.
"While even one dissatisfied customer is too many, the allegations in the AG's filing are based upon a small fraction of Dell's consumer transactions in New York," Bob Pearson, a spokesman for Round Rock, Texas-based Dell, said in an e-mailed statement on Tuesday.
"We are confident that our practices will be found to be fair and appropriate," he said.
The suit comes as founder Michael Dell, who returned as chief executive officer in January, works to revive sales and profit after losing customers to rival Hewlett-Packard Co. The company is also under investigation by the US Securities and Exchange Commission over its accounting and said in March it found evidence of misconduct and errors in its financial results.
Shares of Dell slid US$0.60 to US$24.67 on Tuesday in NASDAQ Stock Market composite trading. They have fallen 1.7 percent this year.
Cuomo's office said on Tuesday he plans to announce a lawsuit against a "major computer manufacturer."
The state claims that Dell Financial Services LP, a joint venture between Dell and CIT Bank, lures consumers with promises of "no interest" loans and then denies about 85 percent of applicants, offering them "regular" financing instead.
The regular plans can offer interest rates that top 16 percent, according to the complaint.
Customers also get a "runaround" when trying to receive a promised rebate on PCs and are subject to a "telephonic version of hot potato" after enduring long wait times for technical support, the state says in the filing.
"Dell's service is anything but prompt and efficient," the complaint says. "Customers are disconnected before they reach the elusive representative who presumably is able or willing to help them."
Dell lost the PC lead to Hewlett-Packard last year after alienating US consumers in part with poor customer support.
The company last year spent US$150 million to improve service, including adding 2,000 technicians and retraining 5,000 others, after consumers complained about long hold times and difficulty getting problems fixed.
Dell's shipments in the US, the largest PC market, fell 14 percent in the first calendar quarter, according to research firm IDC. Hewlett-Packard's shipments jumped 26 percent.
This enabled Hewlett-Packard to win a bigger slice of the market globally, with its worldwide PC market share rising to 19.1 percent from 16.5 percent, Framingham, Massachusetts-based IDC said. Dell's share fell to 15.2 percent from 18.2 percent.
In November, the company said it cut the time US customers waited on support hotlines to three minutes from nine minutes.
In February, Michael Dell launched an online site called IdeaStorm to solicit customer ideas and suggestions for improving the company.
Dell plans to "vigorously defend ourselves in court," Pearson said.
"We are committed to providing a positive experience to all of our customers every day," he said.
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