Jigar Mehta’s WebBlog

October 17, 2006

Sony joining its own battery recall program, might get into financial trouble !!

Filed under: Uncategorized — jigarme @ 5:17 pm

Sony joined its own battery recall on Tuesday, saying it would call back 90,000 of its batteries in its own laptops shipped to Japan and China. The number of batteries in other markets is not immediately clear, although it has been speculated the recall could reach 300,000.

As well as disclosing the recall, the Japanese electronics maker also said that it may revise its earnings forecast for the year due to the increasing recall costs and price cuts in the PlayStation 3.

The company had already indicated that it would be revising the cost of the recall upward from a previously forecasted $250 million. Analysts now expect the number to double, and new calls for additional compensation from partners could push that number near $1 billion.

Sony currently forecasts a 130 billion yen profit for the year, a 43 percent drop from last year. However, that forecast was made in July, well before the recall began to take shape. Now, analysts believe the company’s profit could be as little as a third of that number.

Regardless, most expect the company to rebound in 2007 with the PS3’s release, barring any unforeseen issues in distribution or manufacture.

“We are in the process of determining whether a revision to our annual earnings outlook is necessary,” the company said in a statement. Besides the recall and PlayStation 3 issues, other factors such as exchange rates and overall company performance would be factored in.

Sony’s continuing troubles financially may have factored into Sony Advisory Board Chairman Noboyuki Idei’s surprising comments last week where he all but indicated current CEO Howard Stringer may be on his way out.

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