Dell in hot water for deceptive advertising
Posted
May 28 2008, 02:34 PM
by
Kim Peterson
Rating:
Dell had better make headlines with its earnings call tomorrow, if for no other reason than to bury the news out about its misleading advertising practices. A New York judge came down hard on the company yesterday for baiting customers with financing promotions that it never intended to actually offer.
Dell offered freebies and no-interest financing to "well qualified" or "best qualified" customers, according to the judge. But most customers who took the bait were given interest rates from 16% to 30%. The judge also faulted Dell for shoddy customer service that included long telephone holds and denying rebate requests. The judgment had little impact on Dell shares, which are up 3 cents today to $21.52.
Dell said it disagreed with the judge's decision, but hadn't decided whether to appeal. I think an appeal is unlikely; why would the company revive such a damaging case? The question now is if other states will follow New York in suing the company. New York's attorney general has received 1,000 complaints against Dell, and I'm sure other states are hearing from customers as well. (New York customers can apply for restitution at www.nyagdell.com).
On to the earnings report. Dell is in turnaround mode after a miserable year in 2007, when profits tumbled and revenue barely grew. Key to the turnaround is a new strategy to place Dell products in more stores here and overseas. Although Dell still lets people custom-order a PC, it's focusing more on pre-made models that it ships to stores. Dell is making solid inroads in Asia, getting its computers into electronics chains like Suning and Gome in China.
Analysts are expecting Dell to report a Q1 profit of 33 cents per share and revenue of $15.66 billion. At this time last year, Dell reported profit of 34 cents per share and $14.6 billion in revenue.
Dell shares have been creeping up in the last three months, and Morgan Stanley recently upped Dell's rating to overweight with a $28 price target.
Update: Dell's Q1 results are in, and it looks like the company beat expectations. Revenue hit $16.1 billion, and profit was 38 cents per share. A highlight of the quarter: Notebook computer sales were up 43% from the year before.
Additional reading:
Dude, did Dell finally score?
Dell moves away from build-your-own PC
Dell is so over the shopping mall
Dell disappoints again
Dude, you're getting a dud
