Does Hewlett Packard Owe Its Customers Billions?

Last Updated Oct 17, 2011 6:23 PM EDT

HP has been in the news a lot lately, for all the wrong reasons. Now, there's a chance they could owe customers for a systematic breach of honoring warranties for their customers. Add this to a company that's already playing musical chairs with CEO's, losing well over half its stock value in the last year and a half, and shareholders threatening a revolt, and you've got company in a world of hurt.

A little background
A recent experience regarding an HP printer that was on the fritz, started out as a "customer hell" experience and ended with some shocking revelations from the company. After a 7.5 hour ordeal trying to convince HP that my printer was only six months old and registered, I received an email from HP addressed to "Valued HP Customer" noting they were closing the case. Instead of screaming and hurling the printer out the nearest window, I decided to contact HP media relations for a story.

Even with my low expectations for customer service at this point, I was shocked by what I learned, and became convinced that the HP systems and protocols were set up to make it unreasonably difficult to have a warranty honored:
  1. It is HP's policy to tell the customer their purchase date is the same day as the day the hardware was manufactured, often in Asia. HP spokesperson, Cherie Britt, stated "Without proof of purchase, the manufacture date is the best estimate HP has for the product's purchase date." When questioned as to why the customer is not told that this is actually the date of manufacture rather than the date of purchase, Britt declined to comment.
  2. It is HP's policy to close cases without the consent of the customer. When the case is closed, HP will auto-reject any email sent to HP regarding the issue, no matter how long the customer has spent attempting to resolve the matter. Britt's comment was "The subsequent email you received from HP was meant to reiterate the reason for the case closure. Customers are welcome to open a new case to address any outstanding concerns."
  3. Though HP customers, like me, may think they have properly registered the product, they were not told by HP that more needs to be done to validate the warranty. HP was at first insistent that I did not register the printer, but was then forced to reconsider their position after I noted I was receiving promotional emails from HP. Britt stated "the warranty record shows that the date of purchase was not validated at the time of registration." However, Britt would not comment on the specifics when asked what it was that I failed to do and how such a failure was communicated?
  4. HP has significant shortfalls in documentation on customer calls requiring the customer to virtually start from scratch. In my case, HP noted they had not even retained the serial number of the unit I gave them during the call and I was first told they had no record of either the representative or the supervisor I spoke with. Britt later changed the HP position stating they did have records of who I spoke with but not the serial number of the unit.
Britt stated "HP upholds the highest standards of business ethics and treats all of its customers in a fair and ethical manner. The company currently has more than 80 million consumer products in-warranty and sells millions of PCs and printers every year."

My analysis
While I'm definitely not an attorney, it seems to me that making it unreasonably difficult to obtain warranty support is a breach of the contractual obligation HP owes to its customers. Though this statement is unlikely to shock anyone, I'm very tenacious. My wife calls it my superpower. So despite the outstanding support I received from Office Depot, where I purchased the product, that allowed me to prove the actual purchase date, HP defeated me.

I see HP's systems and protocols set up in such a manner as to make customers think they were properly registered, only to be told their actual purchase date was the date the hardware was manufactured in Asia. HP, of course, is then perfectly willing to provide support . . . for a fee. To make customers start from scratch by not documenting previous interactions, and to close cases without customer consent is, in my opinion, unreasonable.

If this is happening to even five percent of the 80-million products Britt noted are currently in warranty, this could be a big number for HP. Five percent of their revenue last year alone would equate to a breach on $6.2 billion in sales. That compares to a market capitalization of HP of about $52 billion.

My hypothesis is that the rapid decline in HP shareholder value is partially related to these systems and protocols I view as anti-customer. I view HP as an American icon, and hope Meg Whitman will be successful in HP getting its groove back.

Postscript: Before publishing this article, I received an email from HP asking me to complete a survey. The email from Prasanna Dhore, Vice President, Corporate Marketing, was addressed "Dear Valued HP Customer." It first asked if anyone in my household works for the media? After I responded "yes," the survey noted "Thank you for your willingness to participate in our survey. Those are all of the questions that we have for you today."

Author's note: Britt did state HP was willing to work to resolve my issue and I noted I would take HP up on this offer after this story published.
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    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.

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