Lenovo's battery recall tumbles Sony shares

Sony has received yet another blow in a series of setbacks that have shaken consumer and investor reliance in Sony's technological competitiveness. Sony has initiated a global replacement programme for lithium-ion batteries it made for notebook PC’s.

Joining the recall bandwagon, Lenovo Group Ltd. and IBM have also recalled more than half a million notebook computer batteries made by Sony. They said batteries are potentially faulty.

Shares of Sony Corp. tumbled and fell about 1 percent after the announcement. Yusuke Sakai, manager of equities trading at Mizuho Securities said, "The saga goes on, but the recall programme itself has been partly factored into the share price.”

Earlier, in August this year Dell Inc. and Apple Computer Inc. had recalled nearly 6 million notebook PC batteries made by Sony. The shares have lost 8.8 percent since then.

Sony claimed that the cost of the replacement programme were not clear at present. Analysts believe that Sony's battery business is expected to have an operating profit margin of about 5 percent in the current business year.

The reputation of the Sony brand is likely to be damaged due to the recall. However, reposing faith in Sony, Morgan Stanley analyst Masahiro Ono said, "In a longer term, Sony will remain one of the top-class battery suppliers, and it is unrealistic that PC makers halt procurement from Sony." Dell too stated that it would keep Sony as a supplier of notebook batteries.

Meanwhile, Lenovo, the world's third-largest laptop-maker promised to replace the batteries free of charge. Lenovo spokesman Ray Gorman also informed that the financial impact of the recall would be minimal as Sony was supporting the company financially in the recall.

Dell recalled 4.1 million Sony batteries, Toshiba 340,000, and Apple 1.8 million. The other computer manufacturers that use Sony batteries are Hewlett-Packard, Fujitsu, Toshiba, and Hitachi. These manufacturers plan to keep a close watch on the developments.