Sony to recall own batteries

Kiyoshi Takenaka

Sony Corp. (6758.T) said on Tuesday it may change its full-year earnings forecast because of costly recalls of its batteries and a price cut for its PlayStation 3 video game console.

Sony also said it would recall 90,000 of its Vaio brand laptop computer batteries in Japan and China, adding its name to the list of PC vendors recalling a total of about 8 million Sony batteries, which the company has said can on rare occasions overheat and catch fire.

"We are in the process of determining whether a revision to our annual earnings outlook is necessary, taking into account various factors that could affect our group earnings," the electronics and entertainment conglomerate said on its Web site.

Besides the recalls and the PS3 price cut, factors to be considered include fluctuations in foreign exchange rates and the performance of its electronics and entertainment businesses, Sony said.

Shares in Sony ended down 1.8 percent at 4,790 yen, underperforming the Tokyo stock market's electrical machinery index (.IELEC.T) which dipped 0.33 percent.

Sony said in July that it expected its group operating profit to come in at 130 billion yen ($1.1 billion) in the year to March, down 43 percent year-on-year. That compares with the consensus for a 160.9 billion yen profit in a poll of 20 analysts by Reuters Estimates.

Some analysts, however, take a more cautious view on Sony's earnings this year.

Morgan Stanley expects Sony to post an operating profit of 54.3 billion yen for the current business year.

For the following year starting April 2007, it expects Sony's operating profit to bounce up to 375.9 billion yen, driven by growing sales of game software for PS3 and robust revenues at its movie division.

Sony, which will launch the latest version of its blockbuster console on November 11 in Japan, said last month it would sell a version of PS3 with a 20-gigabyte hard disk drive for 49,980 yen ($420), down from the previously announced 62,790 yen.

It is not unusual for video game makers to incur substantial losses at the initial stage of a console launch. They often recoup the losses later from lucrative software sales.

Following Dell Inc. (Nasdaq:DELL - news), Apple Computer Inc. (Nasdaq:AAPL - news), Lenovo Group Ltd. (0992.HK), Toshiba Corp. (6502.T) and some other PC makers, Sony said it would recall 60,000 of its own batteries in Japan and 30,000 units in mainland China.

The number of batteries it will recall in other markets is not clear at the moment, it said.

Sony shares fell over 8 percent since Dell first announce the recall in August, while the electrical machinery subindex rose 6.4 percent.

The Nihon Keizai Shimbun business daily said on Tuesday the electronics maker would likely recall a total of 300,000 batteries, but Sony spokesman Kei Sakaguchi said that estimate was based on speculation.

Sony's recall troubles seemed to increase on Monday after Toshiba said it might seek compensation from Sony for possible damage to its brand image and sales from the battery recall.

Sony said in August that recalls by Dell and Apple would cost it between 20 billion yen and 30 billion yen, but now it is expected to face an even heavier financial burden with the additional recalls.

Sphere: Related Content

No comments: