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Flaming laptop fears are coming home to roost at Sony (SNE, news, msgs).
The Japanese electronics company said in a statement today that it will rack up an extra cost of 51 billion yen ($429 million) in the July-September period for recalls of lithium-ion batteries for laptops announced by practically every major laptop maker in the world.
Sony had initially said the battery recalls will cost the company between 20 billion yen ($168 million) and 30 billion yen ($252 million).
Sony later announced that the recall had affected 9.6 million batteries worldwide. Sony spokesman Takashi Uehara said the 51 billion yen cost associated with the recall does not include "provisions for possible lawsuits," indicating costs may continue to grow.
More trouble ahead?
Even worse for Sony, the pain may not be over. The company may need to further lower its projections if losses related to the battery recall grow, said Tatsuya Mizuno, analyst at Fitch Ratings in Tokyo.Toshiba has said it may demand damage compensation from Sony, and others may follow suit.
"The battery problem is not a simple one-time problem for Sony because it hurts the company's reliability as a supplier in its core electronics sector," Mizuno said.
Sony now expects group net profit of 80 billion yen ($673 million) for the fiscal year through March 2007, down 38% from the 130 billion yen ($1.1 billion) it had projected in July.
The company left unchanged its fiscal-year sales outlook at 8.23 trillion yen ($69 billion) but lowered its operating profit 62% to 50 billion yen ($420 million) from the earlier forecast for 130 billion yen ($1.1 billion).
Recalls by Dell, Apple, more
Sony-made batteries have been recalled in recent weeks by U.S. makers Dell (DELL, news, msgs) and Apple Computer (AAPL, news, msgs), as well as Japanese makers Toshiba (TOSBF, news, msgs), Hitachi (HIT, news, msgs), Fujitsu (FJTSY, news, msgs)and Sharp (SHCAY, news, msgs), whose laptops also use Sony batteries.Sony is joining the recall with its own Vaio laptops and that will also trim earnings for the current fiscal year, Sony said. The total includes the latest recalls of 90,000 batteries in Vaio, Sony said.
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The battery problem stems from batteries that can short-circuit, causing some computers to overheat or even burst into flames. Previously, Sony had not provided a figure of how many batteries would be subject to recall.
Price cuts for PlayStation 3
Meanwhile, a price cut in Japan for the PlayStation 3 console, set to go on sale in November, will decrease earnings for the video game sector, it said.The production delays for the console, which forced Sony to delay the product in Europe until March next year, will also be costly, Sony said.
Sales and profits for the handheld PlayStation Portable have also been lagging and will push down results, the statement said.
But Sony said despite such setbacks, it is on its way to a turnaround in its core electronics business because of hit products such as the Bravia liquid-crystal display TVs and digital cameras.
The 20% price cut in the PlayStation 3 in Japan announced last month is likely to reduce sales because initial shipments are expected to be limited and sell out. The machines are set to go on sale in Japan and in the U.S. in November.
Walkman creator now hammered by iPods
The woes are the latest troubles battering Sony as it tries to turn around its business after getting beaten by rivals on key consumer electronics products such as the MP3 digital music player and flat-panel TVs.It is still struggling in portable music players, where Apple’s iPod commands top market share not only overseas but in Japan.
But Sony has regained some market share in flat TVs with products using displays produced in a joint venture with Samsung Electronics of South Korea.
Sony shares, which have fallen back after gaining 50% earlier this year, slipped 0.4% in Tokyo to close at 4,790 yen ($40.34). The forecast revision was announced just after the market closed.
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