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[August 16, 2006]

Recall may benefit Dell: Company can improve its image if process is easy for customers

(Dallas Morning News, The (KRT) Via Thomson Dialog NewsEdge) Aug. 16--Dell Inc.'s recall of 4.1 million laptop batteries is a major headache and a logistical nightmare. But it may help the Texas computer giant in the long run.

Dell has been trying to improve its image lately after acknowledging that its customer service wasn't making the grade. Its stock has dropped about 40 percent in a year, mostly because its sales growth has slowed and competitors have strengthened.

The recall, issued because the batteries could catch fire on rare occasions, was a great opportunity for Dell to show it's acting voluntarily to protect its customers. If customers find the recall process easy and fast, their opinions of the computer maker may improve.

"In many ways, long-term, this will help in terms of the goodwill Dell is trying to build with its customers and potential customers," said Sam Bhavnani, research director at Current Analysis.

What's more, Dell doesn't expect the recall to cost it very much -- not enough to make a material change in its financial results. Sony Corp., which made the faulty batteries, has said it's financially assisting Dell with the recall, though neither will say who's paying what.

The recall could cost $200 million or more, estimated Roger Kay, who runs analysis firm Endpoint Technologies Associates. If Dell were footing even half that bill, the company would almost certainly have to disclose it in financial records, he said.

On Tuesday, Dell shares rose as investors shrugged off the recall news, which surfaced after the market had already closed on Monday. The stock closed at $22.08, up 84 cents.

Dell is scheduled to report quarterly earnings Thursday. The impact of the recall won't be part of those results.

Sony is the second-largest supplier of lithium-ion batteries like the ones in Dell's recalled computers. So far, no other major computer maker has issued a recall, and some, including Hewlett-Packard Co. and Lenovo, have said they don't plan one. The U.S. Consumer Product Safety Commission is examining the batteries used by all manufacturers.

If rivals have to recall computers later, Dell will look like the company with foresight, analysts said.

The challenge of replacing the batteries in millions of laptops looms. Dell must take care in handling each customer's recall process, without bungling part numbers or shipping addresses.

"If they manage that, it will be a great feat of logistics," Mr. Kay said. "They will actually end up with a good customer touch."

Customers can learn whether their laptops are included in the recall by visiting www.dellbatteryprogram.com. Employees at the Dell Direct store at NorthPark Center can also help customers identify the battery and order a replacement, a company spokesman said.

E-mail charrison@dallasnews.com

Copyright (c) 2006, The Dallas Morning News
Distributed by McClatchy-Tribune Business News.
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