Some years ago, Intel poo-pooed the protests of a math professor who complained that once you got past a certain number of digits in your calculations the Intel chip resulted in incorrect answers. Intel hemmed and hawed and initially allowed replacements only for those who could show that they really did the math. Intel eventually had to make good on all the chips and even its employees’ internal newsletter did a parody of the company’s lame initial response. Enter Dell.
Recently revealed court records show that the math department at the University of Texas at Austin complained to Dell that its Dell computers were failing. Dell’s initial response was that the university had overtaxed the machines with math calculations that were “way hard.â€Â UT Austin was relentless because the machines’ failure fit a pattern; they were all conking out at the same time. So, the litigation resulted. Documents show that employees were aware of serious problems with the motherboards but poo-pooed them and replaced faulty motherboards with other faulty motherboards. Employees also counseled each other on what to say to customers whose computers were failing, “We need to avoid all language indicating the boards were bad or had ‘issues per our discussion this morning.â€[1] Sales folks were given this advice, “Don’t bring this to customer’s attention proactively. Emphasize uncertainty.†A recall was never issued and thousands of customers lost data through the failures.
As Dell deals with this lawsuit, Intel emerges in another way. Dell is also grappling with the SEC investigation into its accounting methods related to payments received from Intel for Dell’s use of Intel chips and processors. Underlying that issue is the antitrust case involving Intel and AMD. In e-mails in the antitrust case, Michael Dell, the company founder who returned recently as CEO, complained to Paul Otellini, Intel’s CEO, that he was losing business because customers preferred AMD processors. Mr. Otellini reminded Mr. Dell that Intel had paid Dell close to one-billion dollars per year, an amount that was “more than sufficient to compensate for the competitive issues.â€[2] Mr. Otellini, in another e-mail, described Dell as “the best friend money can buy.â€[3]
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[1] Ashlee vance, ‘Suit Over Faulty Computers Highlights Dell’s Decline,†New York Times, June 29, 2010, p. B1.
[2] Miguel Helft, “Dell in Talks To Settle Intel Inquiry With S.E.C.,†New York Times, June 11, 2010, p. B1.
[3] Id. At B4.
