Wednesday, July 8, 2009

Dell in Taiwanese Trouble - Zacks Investment Research

A reliable Taiwanese source has recently disclosed that Dell Inc. (NasdaqGS: DELL - News) could be fined up to $758,000, if appropriate authorities decide that the company committed some online pricing errors which violated the law of the land.

As reported by the Taiwanese media, on June 25, Dell's Taiwanese website listed its 19-inch LCD monitors at NT$500 ($15.16) and 20-inch LCD monitors at NT$999 ($30.29). In each case, that's about NT$7,000, or $210, less than the real retail price.

Again on July 5, Dell erred by pricing its Latitude E4300 notebook at NT$18,558 ($562), but later corrected the same to NT$60,900 ($1,850). According to sources, Dell refused to honor the numerous orders that were reportedly placed online by consumers. However, it offered a NT$1,000 ($30) discount for the LCD monitors and a NT$20,000 ($600) reduction on the laptop.

We believe this can pose problems for Dell if proved correct by appropriate authorities. Taiwan's Fair Trade Commission will determine whether Dell has violated the Fair Trade Law by not delivering orders as advertised.

If this goes against Dell, the company could be fined anywhere between of NT$50,000 to NT$25.0 million or between $1,500 and $758,000. We believe that these mistakes are the effect of administrative lapses in the company’s Taiwanese wing.

This will not only attract a financial penalty for the company but will be a big blow to its reputation, which may in turn affect Dell’s business prospects going forward.

We would like to see an organization like Dell to come out of this mess unscathed but cannot help being apprehensive about it. Until there is further clarity, we continue with a Sell rating on the stock.

Tuesday, July 7, 2009

[7/8] #2 RUMOR: Are these pricing mistakes really "Accidental?"

Recently, some Taiwanese Internet users discovered that Dell's hired spokeswoman, Ms. Wu, took a class about "Media manipulation for self-promotion." The class also included detailed accounts on how to attract attention and use public channels available to gain brand recognition and create a media frenzy.

What I am wondering now is if there is a correlation between Ms. Wu and the so-called "pricing mistakes" that Dell made "accidentally??" Who knows?

[7/8] #1 Dell USA also makes Pricing Mistake at 1:30 AM, but Corrects It Within 10 Minutes

At around 1:30 AM Pacific time, Dell's United States website also made a pricing mistake for the Wii Fit which was originally priced at $89.99, but after adding it to the cart for checkout, it became $0. Many American users were able to order the product. However, within 10 minutes after the error appeared, Dell USA quickly moved to remove the mistake from its website. Now, what I'm wondering is...If Dell USA can correct a mistake within 10 minutes, why can't Dell Taiwan??! Why must Dell Taiwan take an additional 9 hours? And besides, Dell Taiwan already knew a long time ago about the pricing mistake, but they purposely left it on the Internet in order to attract even more attention and ridicule. On the other hand, we saw that Dell USA swiftly moved in to remove the mistake, allowing little time for any damage to be done. Now, we can truly grasp the failure and incompetence of Dell Taiwan.

Monday, July 6, 2009

[7/7] #3 Dell President Already Knew about 2nd Mistake, but Waited 9 hours to Close the Website

Immediately after news leaked out that the Dell Taiwan website made a second pricing error, this time on the Latitude E4300, reporters abruptly called up Dell's President in Taiwan to notify him about the situation. His response was, "I already know." This didn't mean anything. He did not offer a concrete response to resolve this. He knew this already, but still Dell's site did not correct the pricing mistake. Rather, it wasted valuable time and kept on accepting orders from consumers.

It was about 1 AM when the pricing mistake was widely publicized. Chun-wei Chung called Dell's public relations office at 2 AM to notify them about the second pricing mistake. In response, the public relations office said they already knew about it. At 2 AM (about 11 AM, Sat., CDT -7), Wei-ming Yu (俞威名) posted on Dell's Facebook website to notify Dell about the second pricing mistake. During this time period, tons of consumers also called in to Dell's sales hot line to report the mistake. Even though it was evident that Dell knew about the mistake, they waited until 10 AM, nearly 9 hours later, to officially close the website.

[7/7] #2 Marubeni, IBM, HP have all Honored Pricing Mistakes--WHY CAN'T DELL?

It's not the first time that companies have made pricing mistakes, but these companies have all honored the pricing mistakes. Why can't Dell?!

IBM- In 2004, on IBM's Mainland China website, priced a $1600 RMB optical drive up for sale accidentally for $1 RMB. This lead many to order the product online. Despite the mistake, IBM still honored the price and shipped out all the orders. IBM apologized and said it was a human error, but still processed all orders.

Marubeni- In 2003, the Japanese Marubeni site made a mistake by pricing a computer for 90% off the original retail price. However, Marubeni still fulfilled all orders and honored the price mistake.

HP- In 2001, HP's Taiwan website sold a laser printer originally priced at NT$5299 for only NT$329, due to a pricing mistake. However, without any gripes, HP absorbed the costs of the mistake and sold the printer at NT$329 to all consumers who ordered at that price.