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Déjà vu at Sony

Posted by: Ian Rowley on October 17, 2006

Another day, another Sony laptop battery recall. Today, Sony said it would be recalling up to 60,000 battery packs used in its Vaio laptops in Japan and 30,000 in China due to yet more concerns over overheating batteries. For the first time since the problems began, the company also said it was assessing the impact of the problem, and a price cut for the PlayStation3 in Japan, on annual profits.

The Vaio recall follows similar moves by Apple and Dell in August and Toshiba, Lenovo, IBM and Fujitsu last month. Yesterday, my colleague Kenji Hall reported that some rivals are also hinting at legal action if Sony doesn’t come up with suitable compensation for the overheating cells.

All of which suggests Sony’s bean counters mightn’t like what they see as they assess the impact on earnings. Following Dell and Apple’s problems recalls, the company said the cost wouldn’t exceed $255 million and didn’t change its net profit forecast of $1.05 through March 2007. But that was before other makers—and now Sony itself—issued battery-related recalls. Add to that the $85 reduction in the price of the PS3 in Japan—not to mention the delay of its European roll out—and analysts are saying profits could be cut by as much as $500 million. Also worrying is Sony’s botched approach to the Li-ion problem, which still isn’t under control two months after the initial Dell recall came to light. A single, comprehensive recall at the beginning would have been costly, but so is the current damage to Sony’s brand.

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