Channel Foresees Chaos, Opportunity With Dell Battery Recall

The calls would stem from Dell's announcement Monday that it's recalling 4.1 million laptop batteries because they pose a fire hazard. Advanced Office Systems holds a state contract with Connecticut to supply Dell notebooks and desktops, and Seaforth anticipates a lot of work ahead in determining if any customers have batteries that must go back.

"The alarming news is out. Now we've got to kind of identify who has the problem, who doesn't and who thinks they have the problem," Seaforth said. "It creates more chaos for us."

Round Rock, Texas-based Dell said the recall covers batteries in all of its notebook lines: Inspiron, Latitude, XPS and Dell Precision. The lithium ion batteries, made by Sony, could be defective and cause severe overheating or fires, according to Dell and the U.S. Consumer Product Safety Commission.

Philip Cardone, a technology services consultant at KDSA Consulting, an Andover, Mass.-based solution provider, said Dell's battery recall provides another sales weapon against Dell in competitive engagements.

"We are doing better today than a year ago, competing against Dell. The clients see the value-add in our systems as opposed to buying the cheap Dells. This just goes to show that what we sell is a better product altogether," Cardone said.

"Price doesn't always have to be the key. Customers will pay a little extra money for a better solution," he added.

The massive recall punctuated several weeks of bad press for Dell, beginning with photographs of a Dell notebook that burst into flames at a Tokyo business conference. The photos circulated around the Internet and led to a series of stories from other customers complaining about Dell notebooks burning.

The Consumer Product Safety Commission estimates that the batteries cost $60 to $180 each. That would put the cost of the recall at around $240 million, though Dell executives said the company won't suffer material financial impact. Industry observers said they believe Sony will pick up a good deal of the tab.

Last year, Dell also had a similar recall of 22,000 batteries, which the company did voluntarily in an agreement with the Consumer Product Safety Commission.

Cindy Shaw, an analyst with investment firm Moors and Cabot, was among the earliest voices suggesting the laptop problems were a potential nightmare for Dell. Although Dell executives have targeted Shaw for criticism on several occasions, she issued a report to investors Tuesday that, at least indirectly, addressed those criticisms.

"It appears there was merit to our concerns about Dell laptops overheating," Shaw wrote in the report.

"We also believe the recall news could sway consumer purchase decisions away from Dell as the back-to-school season gets under way ... ahead of the important holiday season," she said in the report. "Stories of overheating Dell laptops have largely been on tech Web sites, but we believe this recall could expand their influence."

Advanced Office Systems' Seaforth said he believes Dell's customers will get over the controversy and the turmoil will taper off.

"They have made a good effort in the last 24 months with their key or core resellers," he said. "This happens every day in business. I think what we need to do is react and be proactive to the clients out there that might be exposed."

STEVEN BURKE contributed to this article.