Dell Vs Sony: Recalled Battery Debacle

The Dell battery debacle, as expected, has started the passing the buck game between Dell and Sony. The recall of 4.1 million batteries by Dell over concerns of their overheating, is likely to put a big dent in the bottom lines of both the companies. The loss of goodwill will be an added cost.

Market analysts believe that Sony Corp. will help pay for the recall made by Dell Inc. One estimate pegs the total cost of the recall to the tune of about $400 million. However, Sony is adamant that there is a technical problem inside Dell's machines and not a problem with the batteries. A Sony spokeswoman said, "This is an issue specifically down to Dell's battery-charging system," The Japanese computer giant’s shares, however remained under pressure on Wednesday, ending 1.2% lower on the day, at 5,150 yen($44). The issue will surely require attention in terms of brand management and customer service.

Sony's battery-supply business is roughly 3 percent of Sony's total electronics sales and 6 percent of the company's operating profits, which is a small percentage of its overall operations, so the financials would not get hurt in a big way. Another estimate of the recall is that Sony will have to incur a one-off cost of 15 percent to 23 percent of Sony's full-year net profit forecast.

Then there is another threat to Sony. The Sony batteries are also used in laptops made by Hewlett-Packard and Apple Computers. The company may eventually lose its battery-supply business with Dell and these players.

Dell which has grabbed most of the negative headlines for the problem of burning batteries in its notebook computers, said it won't be feeling any financial impact from the recall, the claim indicating that it's a defect on Sony's part. Surprisingly, the investors on Wall Street didn't punish Dell's stock. Shares closed up 4 per cent at $22.08.

The Consumer Safety Product Commission stated that it was investigating all laptop batteries produced by Sony to ensure they do not pose a safety risk elsewhere. The investigations will reveal as to who is the real culprit: Dell or Sony. Till Such time, the fog continues.