Worst case scenario would cut 14 per cent from electronics giant's annual
profit.
Worst case scenario would cut 14 per cent from electronics giant's annual
profit.
Sony faces an unprecedented potential loss of more than US$225m after notebook PC batteries it supplied to Dell apparently exploded or caught fire, industry sources have revealed to vnunet.com.
Analysts have calculated that, in a worst case scenario under which Sony pays to replace all 4.1 million batteries in the affected notebooks, the Japanese company might lose more than US$225m.
Dell announced yesterday that it would repair or replace 4.1 million notebook batteries that contain cells manufactured by Sony.
The computer maker warned customers to stop using the batteries immediately because they could overheat or even start fires. The move follows a small number of recent reports of notebook batteries bursting violently into flames.
Users of Dell Latitude, Inspiron and Precision notebooks are urged to visit a special Dell Battery Recall website.
Based on the information available to date, analysts at Nomura Securities in Japan have speculated about the maximum potential cost to Sony if the company is determined to be at fault.
"If Sony were to shoulder all costs related to the supply of replacements - the worst scenario for Sony - we estimate that the cost would total around ¥26bn [around US$225m]," Nomura predicted in a private research briefing for its investment banking clients.
The analysts stressed that this approximate figure is a "probable worst case scenario", and is necessarily based on several assumptions about the average battery costs due to limited information available from Dell and Sony.
This worst case charge would be equivalent to 14 per cent of Sony's estimated operating profits for the past financial year.
Although Nomura said that this one-off charge can be relatively easily absorbed by Sony, analysts also warned of possible further ramifications.
"Although the costs could be relatively large, we think that the impact on the company's share price is unlikely to be substantial as the recall will likely be seen as a one-time factor," Nomura's report predicted.
"However, if research into the reason for the overheating reveals possible problems across the whole range of batteries, we think Sony's earnings structure could be heavily affected. We thus recommend caution until the cause of the overheating is clarified."
The batteries contain high energy density lithium-ion cells manufactured by Sony in Japan and China. They have been used in 33 different notebook models in Dell's Latitude, Inspiron, Precision and XPS ranges.
While reports of battery fires affecting various manufacturers occasionally surface in the media, problems with Dell notebook batteries leapt to public attention recently after dramatic pictures of a Dell laptop bursting into flames at a seminar in Osaka were published in vnunet.com's sister publication The Inquirer.