Apple issues battery recall

It is latest victim of Sony defects

August 25, 2006|By Dawn C. Chmielewski | Dawn C. Chmielewski,LOS ANGELES TIMES

Apple Computer Inc. yesterday became the second PC maker to recall hundreds of thousands of potential- ly flammable laptop bat- teries.

But the recall may prove less a headache for Apple Chief Executive Officer Steven P. Jobs than for Sony Corp. CEO Howard Stringer.

That's because Sony manufactured the 1.8 million potentially problematic batteries in Apple's iBook G4 and PowerBook G4 laptops - just as it did the 4.1 million batteries recalled last week by Dell Inc. Now, other device makers are scrutinizing rechargeable lithium-ion batteries made by the little-known Sony Energy Devices Corp.

The firestorm over unstable batteries comes at a difficult time for Sony and for Stringer, the first non-Japanese head of the electronics and entertainment giant.

Stringer was installed last year with the goal of restoring some luster to the maker of Trinitron television sets, PlayStation game consoles and such movies as Spider-Man and The DaVinci Code.

Sony's battery brouhaha may wipe out the company's profit for the quarter and tarnish its image as a reliable components producer. Sony shares fell $1.16 to $43.26 as the company said the recent recalls would cost $172 million to $258 million.

"Anything that threatens business is something that Sir Howard and other executives should be paying attention to," Yankee Group analyst Michael Goodman said. "But in terms of the big picture, it does not have the same impact [as] if their TVs started blowing up."

Annoyances such as self-combusting batteries threaten to distract the Welsh-born Stringer from his ambitious restructuring. Among his top goals: Unifying the company's fractious divisions and reconnecting with customers who abandoned Sony's products in favor of rivals such as Apple's iPod.

During his year in the top job, Stringer has shored up Sony's faltering consumer-electronics business, which accounts for about 70 percent of annual sales. One of his first moves was to launch a line of flat-panel televisions that restored Sony to the top of the fast-growing liquid crystal display market.

Stringer's turnaround plan cut 10,000 jobs and closed 11 factories.

Although Sony is among the world's largest manufacturers of lithium ion batteries, the division contributes only about 4 percent of the company's $64 billion in annual revenue, said Soleil Securities analyst Daniel Ernst.

While no recall is good news, he said the company was taking positive steps to correct the problem, including offering free replacements.

"It's an unfortunate thing, but we don't think it's an ongoing thing. Batteries are not the core driver for the company," said Ernst, who estimated that the recall could reduce Sony's fiscal second-quarter earnings by 20 to 25 cents a share. Analysts surveyed by Thomson Financial expected per-share earnings of 23 cents.

Apple, like Dell, forecast no material impact of the recall on earnings.

Sony said microscopic metal particles can enter the battery cell during manufacturing and, on rare occasions, escape the protective lining and come in contact with other parts of the battery cell, leading to a short circuit. Usually, the battery pack will power off when a cell short-circuits, said Rick Clancy, a spokesman for Sony Electronics Inc.

"In certain rare instances, it has led to a cell overheating and then even flames," Clancy said. "That said, the potential for this more extreme situation to occur is very rare - a handful of incidents out of hundreds of millions [of batteries] out there."

Apple recalled its batteries after receiving nine reports of overheating, including two that resulted in minor burns from handling overheated laptops. No one was seriously injured, the company said.

Clancy said Sony has introduced a number of safeguards to the manufacturing process, from late 2005 through the early part of this year, to provide better safety and security of its batteries.

Dawn C. Chmielewski writes for the Los Angeles Times.

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