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Dell Sales & Earnings Down, Complaints Up

November 3, 2005
Computer giant Dell is shrinking ever so slightly, it seems. The Texas-based computer maker has reported low revenue forecasts for two quarters in a row this year, with expected revenue shortfalls and unanticipated operating costs leading to a flurry of finger-pointing and pessimistic pronouncements.

Dell Computers • Advertising • Credit Card Fraud • Dell Finance • "No-Interest" Offers • Rebates • Restocking Fee • Sales Practices • "Surprise" Loans Service • Customer Service • Tech Support • 30-Day Return Policy • Warranty • Extended Warranty Products • Laptops • Printers • Plasma TV Customers • Deployed Military • Small Business Customers • Dell Defenders --- News • Dell To Pay New York $4 Million In Fraud Charges Settlement • Dell Flubs Online Prices • Dell to Pay $3.3 Million to Resolve Deceptive Practice Claims • Judge Rules Dell Deceived Consumers • Dell Closes Sales Kiosks • Wal-Mart To Sell Dell Computers • New York Sues Dell on Consumer Fraud Charges • Dell Breaks Microsoft Stranglehold • Dell Settles Class Action Over Financing Practices • Dell Recalls Notebook Computer Batteries • Chinese Consumers Sue Dell • "Exploding" Dell Laptop Destroys Truck, Imperils Outsdoorsmen • Dell Denies It Knew of Overheating Battery Problem for Years • Dell Cuts Rebate Program Amid Complaints • Seeking Sizzle, Dell Goes Alien • Dell Sales & Earnings Down, Complaints Up • Computer Vendors Charge More For Less Service • Class Action Accuses Dell of Defrauding Customers --- Recalls • Dell Recalls Notebook Computer Batteries • Dell Recalls More Notebook AC Adapters • Dell Recalls Notebook Power Adapters Analysis • Dell Wins Complaint Derby • To Dell & Back • Dell Talks Back

Dell reported on Oct. 31st that it expected third-quarter revenue to come in at $13.9 billion, down from its original forecast of $14 to 14.5 billion. Sluggish sales of consumer PC's in the U.S. and U.K. were pegged as the reason for the revised prediction.

In addition, Dell was forced to spend $300 million of an unexpected $450 million charge for "operational costs" to fix faulty parts in its older model Optiplex desktops.

Dell also attributed the charges to "workforce realignment" and "excess facilities," or more accurately, laying off workers and closing Dell branches.

Dell's weakened consumer computer sales were attributed to buyers' refusals to "trade up" to more expensive PC models, or to buy new parts for their PC's from Dell. However, it may have just as much to do with consumers' increasing frustration with Dell's business practices and customer service.

Dell has been making considerable profit off selling extended warranties to buyers, to the point where the revenue from extended warranties actually offsets the cost of fulfilling warranty claims.

Extended warranties can add tens to hundreds of dollars in extra costs to any computer purchase, with no guarantee that the coverage will actually be useful if the computer is defective or damaged.

Miriam of Alameda, CA purchased an extended warranty for her new Dell PC, only to find it useless when dealing with the continual hardware failures and defective parts in her machine.

"Since July 13 (or earlier), my computer has frozen, crashed, listed a variety of error messages and has been inoperable," she wrote in her complaint to ConsumerAffairs.com.

"I've been on the telephone for inordinate amounts of time, sent and received over 32 emails, had new memory, a new fan, new hard drive, new power supply and new memory installed," she said.

"I've had to deal 98% of the time with Dell technical support in India. On more than one occasion, I was instructed to download software or to go to a website when my computer would not boot up and Dell technicians knew this to be the case…I paid for an extended warranty, but am not getting the services I need."

William, from Boca Raton, FL, purchased a Dell PC and ended up a target of the major credit bureaus.

"The sales person and Dell Financial Services opened a loan using my financial information and a different last name similar to mine. Dell tried to force me to pay twice, and when I refused they contacted all three credit agencies, and then turned over the bogus loan to a collection agency that is threatening my home. This is like extortion. Dell has refused to answer all written communications sent via certified return receipt mail."

Even good business news for Dell has translated into bad news for consumers. The company was vindicated when the Justice Department nailed Korean electronics giant Samsung for $300 million, on charges it was deliberately fixing prices of computer memory. Dell had responded to Samsung's tactics simply by raising the prices of the computers it sold.

However, Dell is very much aware of consumer discontent. In the Oct. 10th edition of Investor's Business Daily, Endpoint Technologies analyst Roger Kay pointed to the proliferation of Dell complaints on the Web as a possible sign of what's going wrong.

"The criticisms at the likes of ConsumerAffairs.com and BuzzMachine.com could hurt Dell's consumer sales," said Kay. "It needs to respond not only by improving customer service, but also through advertising."

Kay claimed that the real test would be "shifts in market share between Dell and rivals in the consumer PC business," which hadn't happened in his view.

But just prior to Dell's announcement of its earnings shortfalls, it was also reported that #2 PC maker Hewlett-Packard had increased its shippings of PC's slightly faster than Dell, while Dell was shipping new machines at the market rate. "For Dell, that's slow," one analyst said.

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