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Toshiba joins massive recall of Sony batteries

Toshiba will recall 830,000 laptop batteries made by Sony, while Dell increases its recall by about 100,000 units.

A correction was made to this story. Read below for details.
Sony's battery problems deepened on Friday after Toshiba joined the list of PC makers recalling its batteries including Dell, Apple Computer and Lenovo Group.

This is the latest in a series of setbacks that have shaken consumer and investor confidence in Sony's technological competitiveness.

Toshiba said it would recall 830,000 laptop computer batteries made by Sony as part of Sony's newly launched global replacement program. Dell, meanwhile, increased the number of batteries in its recall to about 4.2 million units from 4.1 million, the company announced on Friday.

Sony started the program in the wake of yet another recall on Thursday by notebook PC makers of potentially faulty Sony-made batteries.

Lenovo and IBM are recalling more than half a million notebook computer batteries made by Sony after a computer caught fire at Los Angeles International Airport, Lenovo and U.S. officials said on Thursday.

Sony said short circuits could occur on rare occasions when tiny metal particles come in contact with other parts of the batteries.

Toshiba's recall brings the number of batteries recalled to more than 7 million since Dell in mid-August said it was recalling 4.1 million notebook batteries made by Sony.

Sony shares closed down 0.8 percent at 4,780 yen, underperforming a 0.64 percent rise in the benchmark Nikkei average The Toshiba announcement came after the Tokyo market closed.

Shares in Sony, which was hit earlier this month by a delay in the highly anticipated launch of its PlayStation 3 game console in Europe, have lost 8.6 percent since Dell announced its recall in August, while the Nikkei has gained 1.7 percent.

A Toshiba spokesman said the company does not think there any safety issues regarding its PCs using Sony-made batteries, but it will recall them anyway to alleviate customer concerns. He added that Toshiba is not likely to pick up the tab for the recall.

Sony said the costs of the replacement program were not clear at present because details such as the duration of the program and the number of batteries to be replaced have not yet been formally established.

High-margin business
Following the Dell and Apple announcements in August, Sony has said the two recalls would cost it between 20 billion yen and 30 billion yen ($170 million to $255 million).

The higher figure equals about one-fourth of Sony's net profit for the current business year to March.

Analysts said the IBM/Lenovo recall and Sony's replacement program are likely to have limited impact on its earnings and long-term prospects of its battery business.

"The 30 billion yen estimate should have been a conservative one. I don't think these additional factors would raise the cost far away from that estimate," Morgan Stanley analyst Masahiro Ono said before Toshiba's announcement.

"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 said after the recall announcement that it would keep Sony as a supplier of notebook batteries.

Ono said Sony's battery business is expected to have an operating profit margin of about 5 percent in the current business year to March. That compares with Sony's own estimate of its overall operating margin of 1.6 percent for the year.

He expects sales of 180 billion yen at Sony's battery operation in the year to March 2007, representing 2 percent of its overall revenue.

Lenovo, the world's third-largest PC maker after Dell and Hewlett-Packard, bought IBM's PC division in May 2005 and has continued to sell machines with IBM's ThinkPad brand.

The recall affects 168,500 battery packs sold in the United States and about 357,500 packs sold internationally, the U.S. Consumer Product Safety Commission said.


Correction: This story incorrectly reported the number of units in Dell's battery recall. On Friday, Dell increased the number from 4.1 million units to 4.2 million units.