Dell battered over flaming computer

Dell is facing a battering after a court case appears to show that the outfit knowingly sold faulty PCs to corporate clients.

The hardware maker said that it did not intentionally deceive its customers and that it took reasonable steps to compensate them for losses resulting from the defective units.

However, analysts are warning that the story has done damage to Dell’s reputation and could seriously affect the company’s hardware business, which recently started picking up.

Beancounters at Forbes predict that Dell’s legal woes could cause an approximately 20 percent slump in the outfit’s value.

Recently, Dell reported a recovery in its corporate PC sales as companies replace their aging computer hardware. Dell recently projected a 14 percent to 19 percent growth in its 2011 revenues.

Forbes had expected Dell to maintain its 15 percent share in the global desktop market this year and even increase its global notebook share a little.

However, Dell’s legal problems could  cause many customers may now choose to buy their hardware from HP or other competitors, Forbes warned.

Forbes said that if Dell’s notebook and desktop market share were to decline by three percentage points in 2010 and beyond as indicated in our earlier scenario, this could result in 8.7 million fewer Dell PCs sold in 2010 and about 400,000 fewer managed seats in the same year.

Since Enterprises generally prefer to buy most of their IT hardware from a single manufacturer, the court case could have a knock on effect on server and storeage sales. 

Forbes said that if Dell is not able to overcome its problems there could be a downside of 20 percent or more to its stock price due to weak hardware and service sales.