Sony burns quarter of year's profit in battery recall

Sony has confirmed that it will lose up to a quarter of its profit this year as it pays for a huge recall of six million potentially explosive Dell and Apple notebook PC batteries. 

The company revealed in a statement that it currently estimates the cost of the recall at between $175m and $265m, matching predictions supplied exclusively to vnunet.com by Japan-based analysts last week.

According to Sony's estimates, the cost of replacing the batteries will drain between 16 and 24 per cent of its predicted $1.09bn operating profit for the financial year.

Dell announced a recall of four million Sony laptop batteries on 15 August, and Apple recalled 1.8 million batteries on 25 August.

Sony announced that it has changed its battery manufacturing processes to address the issue and improve safety.

The elctronics giant explained how the faulty lithium-ion battery cells could sometimes short circuit, pouring out their stored energy in a runaway reaction which can cause overheating and fire. 

"On rare occasions, microscopic metal particles in the recalled battery cells may come into contact with other parts of the battery cell, leading to a short circuit within the cell," said the Sony statement.

"Typically, a battery pack will simply power off when a cell short circuit occurs. However, under certain rare conditions, an internal short circuit may lead to cell overheating and potentially flames.

"The potential for this to occur can be affected by variations in the system configurations found in different notebook computers.

"Sony has introduced a number of additional safeguards into its battery manufacturing process to address this condition and to provide a greater level of safety and security."

Sony's most recent statement refers to batteries used in products from Dell and Apple. It is not clear from the statement whether the affected batteries have also been used in its own or other manufacturers' laptop PCs.

However, the company stated that it did not anticipate any further recalls of battery packs using "these particular battery cells".

Analysts from Nomura Securities in Japan believe that, despite the size of the loss, its one-off nature makes it little more than a speed bump for Sony. 

The company's latest statements appear to dampen speculation from analysts that the battery manufacturing problems might be more widespread and harder to resolve, leading to a continuing impact on future profits.

See also:

Apple recalls 1.8 million 'fire-risk' batteries

Risk of baked Apple forces mass recall  25 Aug 2006

Dell bullish in wake of flaming batteries recall

Chairman of the direct vendor claims customers will appreciate the recall ‘in the long run’  24 Aug 2006

Dell battery recall 'a lesson to us all'

Even companies without Dell kit should take action, says Gartner  21 Aug 2006

Dell offers a 'hot deal' online

Newspaper ad not thought to refer to flaming laptops  18 Aug 2006

Dell battery recall website inundated

Over a million visitors since launch  17 Aug 2006

Dell battery recall

Direct vendor claims recall will not have adverse effect on its business  15 Aug 2006

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