Bach Seat

– Updated 10-08-10 – Dell has settled the lawsuit which claimed the computer manufacturer hid computer defects. The New York Times reports that Dell settled the suit (09-23-2010) brought by Advanced Internet Technologies in Federal District Court in North Carolina. The terms of the tentative settlement were not disclosed.

In the NYT article, Clarence E. Briggs III, chief executive for Advanced Internet, in Fayetteville, NC, declined to comment about the settlement, as did his lawyer. David S. Frink, a spokesman for Dell, in Round Rock, TX, told the NYT “settling the matter is better and more cost-effective for the company than taking the case to trial.”

– Updated 08-15-10 – The New York Times is reporting that Advanced Internet Technologies (A.I.T) is accusing Dell of withholding evidence in their lawsuit, including e-mails among its top executives including Michael Dell, in a filing made Thursday. According to the NYT, A.I.T. filed a motion in Federal District Court in North Carolina asserting that Dell had deliberately violated a court order by failing to produce documents written by its executives, including the company’s chief executive and founder, Michael S. Dell.

In its filing, A.I.T. asserted that Dell had provided only a snippet of the communications among top executives about the faulty computer problems. The NYT says A.I.T. argued that Dell must have had more high-level communications than a “talking points” memorandum sent to Mr. Dell and Kevin Rollins, then the chief executive.

Larry E. Daniel, a digital forensics expert, has filed an affidavit in the case, stating that the handful of messages Dell provided appeared altered and incomplete according to the NYT article. Mr. Daniel suggested that Dell should provide access to the underlying e-mail files rather than cutting and pasting text.

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Human error is to blame for the latest Dell hardware gaffe. PCWorld is reporting that a sequence of errors led to Dell’s delivery of motherboards with malware.  On 7-21-10, Dell said that some replacement motherboards for PowerEdge servers may have contained the W32.Spybot worm in flash storage. The malware issue affected a limited number of replacement motherboards in four servers, the PowerEdge R310, R410, R510, and T410 models, according to an email from Forrest Norrod, vice president and general manager of server platforms at the Round Rock, Texas firm.

A sequence of human errors

The company confirmed on 7-21-10  it is in the process of overhauling its testing procedures to resolve issues before sending hardware to customers. “There was a sequence of human errors that led to the issue, That being said, we have identified and implemented 16 additional process steps to make sure this doesn’t happen again,” said Dell spokesperson Jim Hahn.

Hahn did not provide more details to PCWorld on the steps being added to track and resolve such issues. But he said that all affected motherboards had been removed from the service supply chain. Dell is quick to point out that current anti-virus software with updated signatures would flag the malware’s presence and users would have to be running an unpatched version of Windows 2008 or an earlier version of the OS to be vulnerable.

PCWorld cites a Dell quality management specialist who wrote in an e-mail that the code was accidentally introduced during the manufacturing process of the server motherboards. “This flash is the one that holds your BIOS and it can be updated online. If proper security precautions are not in place, the flash chip is every bit as capable of containing a piece of malware as is the hard-disk drive,” according to Jim Handy, director at Objective Analysis, a semiconductor research company in PCWorld.

Simha Sethumadhavan, assistant professor of computer science at Columbia University told PCWorld that this incident shows how hardware, either flash or a processor if hacked, can be used as a way to transmit malware. “All software runs on the hardware. If the processor is hacked then it can subvert all software countermeasures. Since hardware is the root of trust, attacks on hardware are potentially more dangerous.”

Other Recent Dell issues include:

• According to the New York Times, Dell is being sued for shipping at least 11.8 million OptiPlex computers from May 2003 to July 2005 that were at risk of failing because of the faulty capacitors. A study by Dell found that OptiPlex computers affected by the bad capacitors were expected to cause problems up to 97 percent of the time over a three-year period, according to the lawsuit.  Making problems worse, Dell replaced faulty motherboards with other faulty motherboards. The NYT points out that Dell employees went out of their way to hide these problems. In one e-mail exchange, a Dell worker states, “We need to avoid all language indicating the boards were bad or had ‘issues’ per our discussion this morning.” In other documents, Dell salespeople were told, “Don’t bring this to customer’s attention proactively” and “Emphasize uncertainty.”
• 2010 Dell announced it was setting aside a $100 million reserve for the first quarter of fiscal 2011, related to a potential settlement with the U.S. Securities and Exchange Commission. The SEC began investigating Dell in 2005 over accusations of misleading auditors and fabricating financial information, which allowed the company to exaggerate its performance. Dell has already restated some of its financial results reported before 2007. it is reported that founder and CEO Michael Dell faces a separate fine totaling $4 million. “Accuracy and completeness are the touchstones of public company disclosure under the federal securities laws,” said SEC enforcement director Robert Khuzami. “Michael Dell and other senior Dell executives fell short of that standard repeatedly over many years, and today they are held accountable.”

• 2010 Dell announced that the company and chairman and CEO, Michael Dell, have proposed settlements to the staff of the US Securities and Exchange Commission (SEC) over claims of illegal accounting practices. It is reported that the original case and investigation dates back to 2006 when Dell employees misled auditors and manipulated results to meet performance targets.

• 2010 A federal appeals court reinstated a class-action lawsuit accusing Dell of selling defective notebook computers. The lawsuit alleges that Dell Inspiron notebooks bought between July 2004 and January 2005 had inadequate cooling systems, power supplies, and motherboards which caused the notebooks to shut down without warning, fail to boot up or deteriorate too quickly. (Reuters)

• 2009 The New York Times and IDC confirmed that Acer overtook Dell as the Number 2 PC maker during the third quarter of 2009.

• In 2008 A New York judge concluded that Dell engaged in repeated false and deceptive advertising of its promotional credit financing and warranties according to the New York Times.

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.