Sony's Battery Recall Costs Mounting

Lithium-ion notebook PC battery recalls are turning into a nightmare for Sony (SNE). The number of computer manufacturers announcing a recall more than doubled last week and the costs for Sony associated with the recalls could triple according to an Asahi Shimbun report last Friday.

Over a month ago Sony said it didn't expect any further recalls of its lithium-ion notebook PC batteries beyond the ones initiated by Dell (DELL) and Apple (AAPL). However, with the addition of new recalls last week by Lenovo (LNVGY.PK), Toshiba (TOSBF.PK) and Fujitsu (FJTSY.PK), the total number of recalled batteries increased by nearly 2 million for a total of almost 8 million.

On Friday the English-language version of the Asahi newspaper from Japan reported that Sony's recall-related costs could total 60 billion yen ($509 million) according to "sources." In a company statement released on Aug. 25th, Sony acknowledged related costs between 20 billion ($170 million) and 30 billion yen ($254 million).

Total No. of Sony-made Battery Recalls Since August

Dell: 4.1 million
Apple: 1.8 million
Toshiba: 340 thousand (no fire risk; recharging problems)
Dell: 100 thousand (follow-up announcement)
Toshiba: 830 thousand
Lenovo: 526 thousand
Fujitsu: undisclosed
Total: 7.7 million

Negative concerns surrounding Sony's battery recalls include:

• Damage to Sony brand
• Loss of business partners
• Increased competition from rival battery-makers: Sanyo (SANYY), Matsushita (MC) and South Korea's LG Electronics
• Threat of further recalls from Hewlett-Packard (HPQ), Gateway (GTW) and from its own Sony-brand notebook PCs

Positive takes on Sony's battery recalls include:

• Losses could be limited since not all batteries recalled will be turned in
• Battery-division is a small part of overall Sony Group, reportedly accounting for less than 2% of revenue

Sony's ordinary shares (Tokyo: 6758) lost 1.05% in Monday trading to close at 4,730 yen ($40.11). The Nikkei 225 meanwhile rallied for a fourth consecutive trading day, gaining 0.79% to close at 16,254.29. During intra-day trading Sony came within 10 yen of its calendar year low of 4,610 yen. Its ADRs lost nearly 2% on Friday to close at $40.36.

Sony Corp (SNE) 1-year chart:

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Disclosure: I do not own shares of any companies mentioned in this article.