Dell optimistic amid customer foul-ups

Michael Dell remains upbeat on his company's future, despite exploding notebook batteries and potential customer lawsuits.
Written by Aaron Tan, Contributor

SINGAPORE--With revenue warnings for four consecutive quarters, Dell Computer founder and chairman Michael Dell remains optimistic about the company's future.

Last month, the company warned that sales and earnings in its second fiscal quarter would fall below forecast because of pricing pressures and slowing demand for PCs. Industry analysts were expecting about US$14.2 billion in revenue, but Dell Computer only expects to record revenues of US$14 billion when it releases its financial results Aug. 17.

During a briefing with reporters here today, Dell said steps are underway to reverse the company's fortunes. The company chairman was in Singapore as an IDA Distinguished Speaker.

"We're focused on ensuring that we are providing a great experience to our customers, and making what we believe are the right investments to deliver a great set of products and the service behind those," he said.

Dell also noted that the company remains a market leader and is gaining share in the fastest growing regions in the world, including Asia. According to Steve Felice, president of Dell Computer Asia-Pacific and Japan, the computer maker has "taken over the number two spot in all of Asia."

"We're having significant growth in countries like Korea, India, Singapore, Malaysia, Thailand, and even in more established countries like Japan and Australia," Felice noted.

Despite its successes, Dell said: "That doesn't mean we are a perfect company with no challenges. We certainly do, and we're addressing those."

"We're seeing good progress with our customer experience initiatives and dedicated more than US$100 million specifically toward that," he said. "And the indications and metrics that we see, both internally and externally, point to improvement and steady progress."

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When asked about the company's plans to extend the use of AMD chips to other product lines, Dell said "there were reports" but later added, "we did not make an announcement".

But Dell Computer's efforts to improve its standing among customers might be dented by a decision to recall 4.1 million Sony-made notebook batteries worldwide this week, the biggest of such exercise in its 22-year history. Media reports have indicated that the move is expected to cost Dell Computer more than US$300 million.

Dell, however, said the cost incurred from the recall will have "no material impact on our financials".

He added that the company has been working with Sony to understand what caused the contamination in the batteries, which resulted in the flaming or exploding Dell Computer notebooks.

Dell said the company is now confident that Sony has taken the right measures to prevent similar occurrences from taking place.

However, another incident could put a strain on Dell Computer's customer relationships. The company was apparently sued by customers in Xiamen, China, who felt shortchanged by their notebook purchases and accused the company of shipping laptops which were touted to contain chips that support virtualization, when they did not.

Felice said: "We have not confirmed any formal legal action. But we were very proactive. Customers who ordered one thing but received another because there was an error on our Web site, got a refund."

"It's a pretty complicated [product] configuration process, and sometimes errors happen," he said. "We try to minimize those, but when they do, we're very responsible in going back and [rectifying] the mistakes we made."

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