TOKYO (Reuters) -Dell Inc.’s recall of 4.1 million notebook computer batteries could cost Sony Corp. anywhere from 10 billion yen to 50 billion yen ($85-$430 million), hurting the Japanese electronics maker’s short-term earnings and its brand image, analysts said.
“As the batteries were made by Sony, the possible impact of the news on Sony’s earnings is a concern,” said Eiichi Katayama, an analyst at Nomura Securities Co. Ltd. “Until management discloses details of the cause, the risk of a larger impact remains.”
The recall comes just as Sony tries to revamp its electronics business with its Bravia-brand LCD TVs and Cybershot digital cameras, as it faces fierce competition from rivals Samsung Electronics Co. Ltd. and Sharp Corp.
Dell, the world’s largest personal computer maker, announced on Tuesday its biggest recall in its 22-year history, saying the lithium-ion batteries made by Sony could smoke and catch fire.
The news sent Sony’s shares down 0.4 percent the same day, and pushed the stock down a further 1.15 percent on Wednesday to 5,150 yen, going against Tokyo’s electrical machinery subindex IELEC.which gained 1.73 percent.
But while analysts gave a wide range of cost estimates related to the recall, most noted that Sony’s battery-supply business is small compared with its overall operations, even if the company eventually loses its battery-supply business with Dell and others.
Macquarie analyst David Gibson estimates Sony’s battery operations account for roughly 3 percent of Sony’s total electronics sales and 6 percent of the company’s operating profits.
Gibson reckoned the recall would mean a one-off cost of 20 to 30 billion yen, or 15 to 23 percent of Sony’s full-year net profit forecast of 130 billion yen.
A Sony spokesman said the company is still assessing the possible financial impact of the recall.
He added that nothing had been decided on whether Sony would pay for all the recall costs involved. The overheating problem is believed to be specific to the batteries supplied to Dell, he said.
U.S. consumer safety officials said on Tuesday they were reviewing all Sony-made lithium-ion batteries in laptop computers for fire hazards.
The Sony batteries are also used in laptops made by Hewlett-Packard Co., Apple Computer Inc. and Lenovo Group Ltd.