Aug. 14 (Bloomberg) -- Dell Inc.'s consumer satisfaction dropped in the past year, signaling that a $150 million effort to improve customer service and product quality may have fallen short, a report found.

Dell's score dropped 5 percent to 74 out of 100, putting it near the bottom of the University of Michigan's annual rankings of personal-computer makers. The rating fell back to Dell's 2005 level, after an improvement in 2006. In rankings of online services, meanwhile, Yahoo! Inc. pulled ahead of Google Inc. for the first time since Google was added to the study in 2002.

The report is another setback for Dell, which aims to retake the lead in PCs from Hewlett-Packard Co. Customer complaints and a lack of updated computer designs ate into Dell's consumer sales over the past two years. Company founder Michael Dell returned as chief executive officer in January to bolster sales and rebuild its reputation.

``We saw Dell drop like a rock in customer satisfaction in 2005,'' said Claes Fornell, a marketing professor at the University of Michigan who led the study. ``Since then, it's been difficult for Dell to come back.''

The university surveys 70,000 consumers for its annual American Customer Satisfaction Index to gauge how well U.S. companies provide customer service.

Apple Reigns

While Apple Inc. retained the top ranking among computer manufacturers, its rating dropped 4.8 percent. The Cupertino, California-based company scored 79, compared with 83 last year. Overall, the computer industry rated 75, 2.6 percent lower than last year.

Hewlett-Packard, based in Palo Alto, California, scored 76, a rise of 1 percent, while its Compaq brand scored 73. Gateway Inc., the third-largest U.S. computer maker, saw its score rise 2.7 percent to 75, its highest rating since 2000.

Dell hired 2,000 U.S. service representatives last year, retrained 5,000 more and started DellConnect, a program that links technicians to consumers online. Since taking charge this year, Michael Dell has shuffled management and begun to sell computers at retailers such as Wal-Mart Stores Inc.

``We know that we need to do more to deliver strong customer satisfaction,'' Jodi Zweifler, a Dell spokeswoman, said in an interview. ``Dell's own survey results show customer satisfaction is improving, and we continue to make the necessary investments to continue that trend.''

Fewer Transfers

For instance, Dell has reduced the number of times it transfers callers seeking technical support by 62 percent, Zweifler said.

Sales of Apple's Macintosh computers jumped by a third last quarter to a record 1.76 million. The company's growth may have contributed to its drop in customer service, Fornell said. ``They are a victim of their own success,'' he said.

Dell shares fell 24 cents to $26.46 at 4 p.m. New York time on the Nasdaq Stock Market. Shares of Hewlett-Packard dropped $1.15 to $47.28 on the New York Stock Exchange. Apple shares declined $3.76 to $124.03 on the Nasdaq.

``Customer satisfaction is very important to Apple,'' Natalie Kerris, a company spokeswoman, said. ``While we're pleased that we're still No. 1, we're going to try even harder.''

Among Internet services, Yahoo's customer satisfaction rose 4 percent to 79. That put it ahead of its larger rival Google, owner of the world's most-popular search engine, whose score fell 4 percent to 78.

Upgrade Edge

Upgrades to Yahoo's e-mail service helped boost its ranking, the survey found. The company added functions last year that let users drag messages into folders, similar to how they handle desktop icons.

While Google leads in Internet search, the many other features in Yahoo's Web portal gave it an edge, according to the report.

Yahoo revamped its executive team in June, bringing back co- founder Jerry Yang as chief executive officer to replace Terry Semel and promoting Susan Decker to president.

Many of Google's improvements have gone unnoticed by consumers, the report found. Google has upgraded its maps, calendars, news and Internet-messaging features. Those improvements ``are undetected or ignored by the mass population of search users,'' the report said.

Shares of Yahoo fell 85 cents, or 3.5 percent, to $23.72. Google shares dropped $6.90 to $508.60.

To contact the reporters on this story: Melita Marie Garza in New York at mgarza4@bloomberg.net; Ari Levy in San Francisco at Alevy5@bloomberg.net

Last Updated: August 14, 2007 16:20 EDT