Another Headache for Sony

In today's Wall Street Journal, Nick Wingfield and Chistopher Lawton report on the latest recall involving Sony-made notebook PC batteries in: Apple Follows Dell With Recall Of Laptop-Computer Batteries.

Apple recalled 1.8 million Sony-made lithium-ion notebook PC batteries yesterday after Dell just issued a recall of 4.1 million last week. 1.1 million batteries were sold in notebooks in the U.S. and 700,000 were sold overseas. Apple has received nine reports of overheating laptops, two of which caused minor burns and seven that caused minor property damage.

The bottom line: Apple's recall only applies to discontinued models and it says it expects the recall will not have a material impact on its financial results. Similar to the Dell recall in which Dell also doesn't expect to be financially impacted, Sony said it will assist with the costs of the recall -- estimating the two recalls will cost between 20 and 30 billion yen ($172m-$258m). Sony also said it "anticipates no further recalls of battery packs using these particular battery cells."

Comment: As I said with the Dell (DELL) battery recall (read more here and here), the positive take away is that the firms involved are taking this situation seriously and being very open with the public. Sony (SNE) shareholders might want to especially see the first link in the prior sentence which is a summary of a WSJ article entitled, "Sony's Computer-Battery Recall Likely Won't Unplug Its Revival."

I think there are three key questions for Sony: (1) is the Apple recall the last one, (2) how many of the batteries will actually be returned, and (3) what does this mean for Sony's battery unit -- in terms of business relationships and use in other products?

I would have expected Sanyo (SANYY), the world's largest maker of lithium-ion batteries would have experienced some of the fallout from the battery recalls. Since August 15th however, its ordinary shares (Tokyo: 6764) are up 4.3% and on Tuesday were up by as much as 7.8% with its share price falling over the remainder of the week as the Nikkei 225 lost ground.

Apple's shares gained 50 cents Thursday to close at $67.81.

Sony has traded lower in recent days first on a downgrade by Mitsubishi UFJ Securities (also see this post) and then on the news of the Apple recall. Sony's ordinary shares (Tokyo: 6758) have lost 4.4% since August 14th after having been up slightly during the whole period until this Thursday.

Click here to see Sony's statement regarding its support of Apple's recall.

For Apple users, click here for more information from Apple and remember the models affected by the recall are the iBook G4 and PowerBook G4 sold since October 2003 along with separately sold batteries.