Battery recall Dell’s only August highlight

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By  Published  September 1, 2006

According to the poets at least, April is supposed to be the cruelest month. We suspect that if anyone were to mention that right now to Michael Dell, chairman of the company he founded, and his CEO, Kevin Rollins, they would be more than likely to reply “What about August?”

Last month would have been a bad one for the computer giant, even if it hadn’t been forced to initiate one of the largest-ever product recalls in electronics history (if not the largest ever).

In fact, the positive press it received for its decision to quickly recall 4.1 million notebook batteries made by Sony because of the potential fire risk that they pose was to prove to be something of a ray of light for the firm.

Analysts and industry watchers have praised Dell, a firm not exactly noted for customer service, for how well it has handled the product recall. By contrast, rival Apple’s own product recall, also announced last month and also over issues with Sony batteries, has been criticised for not providing enough information to customers.

So score one for Dell.

However, while making the most of a bad job is all well and good, having airlines ban passengers carrying your product onboard (as Qantas in Australia has done) because they are seen as a serious safety risk is hardly the sort of news that cheers investors.

Nor is the news that Dell is facing investigation by the US Securities & Exchange Commission for the way it counts revenues, a disclosure that has had industry watchers questioning how long Rollins can remain as CEO.

The firm’s financial results have been dismal by its own, admittedly high, standards: it is expected to make US$900 million less in net income this year than last year.

Even its much-vaunted decision to finally work with AMD is seen as causing problems: it has been widely speculated that Intel is going to negotiate that much harder with Dell now that it is no longer a one-chip supplier firm.

Plus, the timing could have been better, with Intel now introducing chips that close the technology gap on AMD.

To make all this worse of course, arch-rival HP is currently enjoying something of a resurgence, with the firm’s recent financial results suggesting that it is going to have an extremely strong 2006.

CEO Mark Hurd is being lauded by Wall Street for having finally made a success of Carly Fiorina’s (his predecessor) strategy of buying Compaq back in 2002.

While he has had to cut jobs to achieve success, that has never exactly been an unpopular decision with the money men (the feelings of the people who lose their jobs are a different matter of course).

Dell is still in an extremely strong position in the industry and will be a firm to watch this year, but it needs the change in season to bring some good news.

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