Battery recall estimated to cost Sony at least $430 million
Tokyo (Japan) - Trying to put an end to the guessing game as to how many more laptops will be added to the battery recall tally, Sony today revealed more details about the total impact from the massive, multi-million dollar recall. The electronics giant believes that the final count of affected laptops will reach 9.6 million, which is a a significant increase from the last official number of around 8 million.
Sony also updated its prediction on how much this headache is going to cost: In a 67% jump from the official estimate in August, the expected cost for recall restitutions is now set at around $430 million. Last month, Sony gave a low-end estimate of $267 million.
Sony also commented that this number does not take any consideration of possible lawsuits, which could open up another big can of worms. The defective batteries were capable of exploding when plugged into a laptop, but no cases of serious injury have been reported.
The list of impacted notebook manufacturers, which has been growing since the recall was first implemented months ago, now includes Dell, Apple, IBM, Lenovo, Toshiba, Fujitsu, Hitachi, and Sony.
Correlatively, Sony today also announced changes to its earnings forecast for the rest of the year. It was obvious that the battery recall would impact previous predictions, but until now Sony had not announced the magnitude of the effect. Additionally, Sony's PS3 price cut in Japan will reduce the level of revenue that was initally planned for sales of the next-generation console.
Sony is now saying that it expects a total profit of $674 million for 2006. The previous forecast for the year was more than $1 billion, which was also about what the total profits from last year equaled, meaning the decrease in profits from last year, as well as from the company's last estimate for this year, is around 38%. Even more telling is the new prediction for 2006's operating profit, which is ideally higher than net profit. Sony now expects this number to be $432 million, a shocking 77% less than the company's operating profit from last year. Previous predictions for 2006 were in the area of $1.1 billion.
Assuming the battery recall issue mostly gets swept under the rug by the end of the year, and with PS3 production problems resolved by next year, Sony has the opportunity, if not the necessity, to get its act back together in 2007.
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