Sony Posts 94% Loss from Recall Battery snafu leads to massive loss, but CFO says holiday PC sales won’t suffer. October 26, 2006 Sony posted a 94 percent loss in its net profit for the fiscal second quarter Thursday, mainly because of the huge number of notebook battery pack recalls that now total about 9.6 million units. The Tokyo-based tech giant said its net profit for the July to September quarter dove to ¥1.7 billion ($14 million) from ¥28.5 billion ($240 million) a year ago. However, on the bright side, Sony CFO Nobuyuki Oneda said at a press conference that the recall was unlikely to affect year-end sales of its PCs, like the company’s Vaio line of notebooks and desktops. On the negative side, though, Sony is predicting increased competition in the flat panel TV segment. “I know that companies like Sharp, Samsung, and Panasonic will all stage a full-out offensive during the year-end shopping season,” he said, according to Reuters. Meanwhile, the Japanese government is reportedly considering setting guidelines for battery manufacturers in the wake of Sony’s massive recall, which has affected a number of other Japanese computer makers, including Fujitsu, Hitachi, Sharp, and Toshiba (see Sony Recalls 90K Laptop Batteries). Sony has said that tiny metal particles can cause short-circuiting in the batteries. Instead of shutting down, the battery occasionally overheats. Japan’s Ministry of Economy, Trade, and Industry has rounded up a group of academic experts who will look at drawing up guidelines for the batteries. The United States Consumer Product Safety Commission has also been working with Sony and other computer makers like Gateway, IBM, and Lenovo on the recall (see Gateway, Sony Recall Batteries and Lenovo, IBM Recall 500K+ Batteries). Battery Competition Heats Up The lithium ion battery cells built by Sony Energy Devices have been blamed for overheating and in some cases leading to fires in some laptops. In August, Dell kicked off the recall drive after reports of at least two of its laptops catching fire, and Apple Computer followed shortly thereafter (see Dude, You’re Getting a Recall and Apple, Sony Burned). The problems with Sony’s batteries could lead to opportunities for another Japanese battery maker, Matsushita’s Panasonic unit. However, Matsushita too has recalled batteries for some of its notebooks (see Matsushita Recalls Batteries). Chinese battery makers like China Bak Battery also see opportunities. On top of the battery headaches, Sony has been experiencing problems in the video game area, with delays of its PlayStation 3 game console largely attributable to its complex Blu-ray high-definition DVD technology. The PS3 is expected to debut next month in time for the holidays, but it will be battling against Nintendo’s new Wii console as well as Microsoft’s entrenched Xbox 360 for attention from eager shoppers. Despite the holiday sales opportunities, Sony predicted losses last week in its video game unit due to slowing sales of the PlayStation Portable (PSP) handheld player and a price cut for the PS3 in Japan (see Sony Slashes Forecast). Despite all the problems, shares of Sony rose $0.58 to $41.33 in recent trading.