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Thu, Aug 17, 2006 - Page 10 News List

Sony `embarrassed' by battery recall

BATTERY BLUNDER Analysts said the recall of batteries suppiled to computer-maker Dell was a setback, but one from which the electronics firm could recover


Sony Corp is fully cooperating with Dell's recall of Sony-supplied batteries powering 4.1 million notebook computers, but doesn't yet know how much the recall will cost, a spokesman said yesterday.

The recall is the largest of electronics-related products involving the US Consumer Products Safety Commission, and a major embarrassment for Sony as it tries to overhaul its electronics operations under Welsh-born Howard Stringer, the first foreigner to head the company.

Share prices

Sony share prices closed down ¥60 (US$0.52) or 1.152 percent at ¥5,150 yesterday, even though the Tokyo Stock Exchange's benchmark index surged to a nearly three-month high.

Sony shares dipped ¥20 or 0.38 percent on Tuesday after the recall news broke, but the selling intensified a day later as the impact of the recall sank in, analysts said.

"News of this battery defect certainly sent a shiver through investors' spines ... especially since Sony is a highly reputable high-tech brand," said Osamu Hirose, senior analyst at Tokai Tokyo Research Center.

The problem affecting the Dell computers lies in lithium-ion batteries manufactured by Sony Energy Devices Corp based in Fukushima, north of Tokyo, Sony spokesman Takashi Uehara said.

Metal particles got into some batteries during production, and that could cause overheating and even fires in some cases, the spokesman said.

Batteries powering Sony's Vaio laptops don't have the same problems because the problem develops only in combination with some computers, he said.

"We are proceeding immediately to support this recall," Uehara said, adding that Sony was still calculating the costs of the recall and will announce it as soon as possible.

Goldman Sachs in a report earlier this week estimated the sales price of the affected batteries for Sony at ¥39.4 billion (US$338.5 million). That number is a rough indicator for what the recall may cost Sony.

David Gibson, senior analyst at Macquarie Research Equities, said the recall will likely cost Sony somewhere between ¥25 billion and ¥35 billion, assuming the cost for replacement would be US$50 each, although not everyone would ask for a replacement.

The analyst told Dow Jones Newswires that the damage to Sony is likely to be limited because that's only a fraction of Sony's massive business.

First-quarter profit

Sony, based in Tokyo, recorded a ¥32.3 billion, profit during the fiscal first quarter on the back of strong sales of flat-panel TVs and digital cameras. That was a big improvement from the ¥7.3 billion loss posted the same period last year.

Quarterly sales jumped 11 percent to ¥1.74 trillion from ¥1.57 trillion a year ago.

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