Sony singed by Dell battery recall
Published: 16 Aug 2006 13:35 BST
The massive laptop battery recall programme announced by Dell on Monday is likely to cause significant problems for Sony, analysts believe.
Shares in Sony closed down 1.2 percent lower in trading on the Nikkei share index in Japan yesterday, when the overall index rose by about 1.6 percent, after Dell's recall of 4.1 million batteries was announced.
The batteries in question were manufactured by Sony and sold in certain Dell laptops between April 2004 and June 2006.
Sony had indicated that it will cover some of the costs of the recall, which Japanese bank Nomura Securities has estimated could total £118m.
"If Sony were to shoulder all costs related to the supply of replacements, we estimate that the cost would total around 26 billion Yen (£118m)," Nomura analyst Eiichi Katayama estimated in a research note, according to the Daily Telegraph.
Another analyst, Benjamin Reitzes of UBS, has reportedly estimated that the recall could cost $400m (£211m).
Dell's recall was prompted by several reports of laptops bursting into flames.
Roger Kay, an analyst with Endpoint Technologies Associates, says the problem is caused by impurities within the anode and cathode of the battery cell. Over time those impurities — usually tiny pieces of metal — can work their way to the edge of the anode or cathode and rupture the isolator that sits between the two, he said. Once that happens, it short-circuits and can cause a fire.
Sony would face much greater problems if faults were found in batteries it has supplied to other laptop manufacturers. However, it is possible that problems wouldn't arise if the battery cells were installed or managed differently.
"If research into the reason for the overheating reveals possible problems across the whole range of batteries, we think Sony's earnings structure could be heavily affected," Katayama cautioned.
Customers can visit a Dell Web site to determine if they need a new battery.
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