Sony to lose $560m on PS3 and burning batteries

Sony will lose at least $560m from its predicted earnings this year as it pays for huge battery recalls and a price cut for its PlayStation 3 games console, analysts believe. 

The company has also been hit by allegations that it knew its notebook PC batteries could catch fire a year ago, but failed to understand the magnitude of the problem.

The mounting cost of problems with notebook batteries and the PlayStation 3 will cut Sony's expected $1.1bn profits in half this year.

This figure could rise further, according to industry analysts, particularly if PC vendors or consumers take legal action against Sony. Five major notebook vendors have so far announced battery recalls.

"These issues raise questions about the positioning of rechargeable battery operations, which have no part in Sony's vertically integrated model, and of the Cell processor, which is supposed to be a core part of the structure," said Nomura Securities analyst Eiichi Katayama. 

A global recall of some 10 million lithium ion notebook PC batteries is likely to cost Sony almost $340m, even assuming that the company avoids expensive legal action related to the issue, Nomura estimates.

In addition, a decision to slash the price of the PlayStation 3 in Sony's strong home market will cost a total of $220m, the analyst predicts.

In a further shock to Sony, a Japanese newspaper has alleged that the company knew almost a year ago that its batteries could catch fire, but failed to appreciate the seriousness of the problem.

Sony first became aware of the battery problem in December 2005, when a Dell notebook caught fire in Japan, the Daily Yomiuri reported, citing unnamed Dell and Sony representatives.

See also:

HP stands by its Sony batteries

No risk of fire, claims vendor  04 Oct 2006

Sony fires up global battery recall

Replacement programme designed to address overheating 'concerns'  02 Oct 2006

Lenovo joins battery recall party

Another 526,000 Sony batteries recalled over fire concerns  29 Sep 2006

More fire risk batteries recalled

Lenovo and Toshiba are added to the list of vendors affected by mass battery recall  29 Sep 2006

Sony issues global battery recall

Announcement leads Dell and Toshiba to recall additional laptops  02 Oct 2006

Battery issues cause travel headaches

Virgin Atlantic’s restrictions on Dell and Apple laptops will add to firms’ mobility concerns  21 Sep 2006

Panasonic laptops hit by battery curse

Panasonic announces recall and joins vendors suffering battery problems  06 Sep 2006

Greenpeace to monitor disposal of faulty batteries

Environmental organisation keeps a WEEE watchful eye on battery recall  06 Sep 2006

Sony burns quarter of year's profit in battery recall

Six million batteries at risk will cost up to $265m to replace  29 Aug 2006

Apple recalls 1.8 million Sony laptop batteries

PowerBook and iBook computers at risk of overheating  25 Aug 2006

Exclusive: Sony 'could lose $225m' in Dell battery fiasco

Worst case scenario would cut 14 per cent from electronics giant's annual profit  15 Aug 2006

Like this story? Spread the news by clicking below:

 del.icio.us     Digg this     reddit!